Sri Lanka's Tamil Tiger rebels have "no option" but to push for an independent state, their leader has said.
Prabhakaran was outspoken in his criticism of the government
Prabhakaran said a truce with the military was "defunct" and accused the government of unleashing war on Tamils.
The BBC's Dumeetha Luthra in Colombo says that while he did not mention re-starting the war, the threat was there in almost every sentence.
Violence has soared in Sri Lanka since late last year, with both sides accused of breaking the 2002 ceasefire.
"It is now crystal clear that the Sinhala leaders will never put forward a just resolution to the Tamil national question," Prabhakaran said.
"We are not prepared to place our trust in the impossible and walk the same old path.
"The uncompromising stance of Sinhala chauvinism has left us with no other option but an independent state for the people of Tamil Eelam."
In his annual speech he accused the government of instigating a two-pronged war - military and economic - against the Tamil population.
Our correspondent says that Sri Lanka is already in an undeclared war, and the speech puts it firmly on the path to continued and worsening violence.
Speaking on what the Tamil Tigers refer to as Heroes' Day - to commemorate more than 18,700 dead rebel fighters - Prabhakaran said the 2002 ceasefire with Sri Lankan government was "effectively buried".
He accused the government of wanting to decide the fate of the Tamil nation using military power.
"It wants to occupy the Tamil land and then force an unacceptable solution on the Tamils," he said.
Prabhakaran said the freedom struggle had already been postponed twice but would now recommence.
Neither side has formally declared a return to hostilities
Sri Lankan military spokesman Keheliya Rambukwelle accused the Tamil Tiger leader of displaying "astounding duplicity" during the course of his speech.
In an interview with the BBC Sinhala service, Mr Rambukwelle said that Prabhakaran had pledged a one-year peace period after his last "Heroes' Day" speech.
"But two weeks afterwards he was the man who was responsible for escalating the level of violence," Mr Rambukwelle said.
"Despite this, we will keep the window open for peace talks."
The BBC Tamil Service's Ethirajan Anbarasan says the rebel leader seems to have lost faith in an internationally mediated peace process, and his speech may well have strengthened hardline Sinhalese majority elements in the south.
In his annual speech made this time last year, Prabhakaran hinted that he was ready to enter a negotiated peace process, and gave President Mahinda Rajapakse one year to resolve Tamil demands for self-rule in the country's north and east.
But soon after making that speech, the island saw a sharp escalation in open conflict, with more than 3,500 fighters and civilians since being killed in aerial bombings, assassinations, bomb attacks and daily skirmishes, according to government figures.