The Sri Lankan military has launched a new offensive aimed at forcing Tamil Tiger rebels from areas close to the crucial eastern port of Trincomalee.
At least 12 soldiers have been killed. The rebels say they lost three fighters and that 20 civilians were killed in air raids, but this is not confirmed.
Sporadic fighting is also continuing in the northern Jaffna peninsula.
The past month has seen the worst violence since the 2002 ceasefire between the government and rebels.
The UN says more than 200,000 people have been displaced by the renewed clashes.
Undeclared war
Military officials said troops were moving towards Sampur - a strategic point overlooking Trincomalee harbour which has been used by the rebels to shell a nearby naval base and attack military convoys.
"We have killed no civilians. I don't think any civilian lives there"
Local journalists report hearing heavy rocket and artillery fire from the area, as the army pounds rebel positions.
Army casualties came during exchanges of artillery and mortar fire with rebels, a military spokesman said.
More than 90 soldiers have been wounded in the operation and taken to hospitals in Kanthale and Polonnaruwa.
Hospital sources said three seriously injured soldiers had been airlifted to Colombo.
The rebels say five of their fighters were hurt as well as the three killed. In addition to 20 civilians they say were killed, the rebels say 26 were also hurt in air raids.
The military said it had targeted artillery bases, and had killed no civilians.
I don't think any civilian lives there," said military spokesman Prasad Samarasinghe.
The competing claims could not be independently verified, nor could the rebels' casualty figures.
Analysts say this could be a decisive battle.
They say Sampur is critical for the Tigers as a connection between their stronghold in the north and bases further south along the eastern coastline.
The latest clashes come a day after the Red Cross ferried 150 foreign nationals to Trincomalee from the Jaffna peninsula.
On Friday the first aid shipment arrived for those stranded in Jaffna, which has been cut off for the past few weeks following the hostilities.
Supplies on the northern peninsula have been running low and thousands of people have fled to churches seeking refuge.
Sri Lanka's undeclared war is being conducted on three fronts, with air raids, artillery strikes and mortar attacks.
More than 60,000 people have died during two decades of conflict in Sri Lanka. The Tamil Tigers want autonomy for minority Tamils in the north and east.
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