The Sri Lankan army says an offensive has begun to try to take Kilinochchi, the Tamil Tiger rebels' de facto capital in the north.
Troops have been attacking the rebels' defences from three directions since Sunday morning in heavy rain.
The sides give conflicting casualties. The army says that 27 soldiers have been killed. Rebel sources say at least 78 troops died in weekend fighting.
The army wants to crush efforts by the rebels to win a separate Tamil state.
Correspondents say that both sides have at times been bogged down in knee-deep mud.
The pro-rebel Tamilnet website says that the latest fighting is continuing amid heavy flooding and rising concern over the plight of thousands of displaced civilians.
It quotes unnamed rebel sources as saying that 43 soldiers were killed in fighting over the weekend at a strategic junction near Nalloor.
It also said that a "pitched battle" had been fought at the Siva Hindu temple near Kilinochchi.
The government has refused to comment on the Tamilnet reports, but the army has said that heavy fighting is currently taking place.
"Twenty-seven soldiers have made their ultimate sacrifice for the motherland while 70 others suffered injuries during the battle," a defence ministry statement said.
It said that "intercepted radio transmissions of the Tigers" indicated that they had suffered heavy casualties.
"Over 120 Tamil Tiger cadres have been killed and 80 others injured in the Kilinochchi area since Sunday morning," the ministry said.
Correspondents say that while skirmishes are taking place throughout rebel-held areas of the north, the heaviest fighting is taking place around Kilinochchi.
The town is the Tigers' de facto capital, with political offices, courts, a police headquarters and other administrative buildings.
The BBC's Roland Buerk in Colombo says that its capture would be a major symbolic victory for government forces - but would leave the rebels still in control of territory in the north-east of Sri Lanka around Mullaitivu.
On Thursday the Tigers' leader Velupillai Prabhakaran is due to deliver his only speech of the year as the rebels commemorate their dead.
Aid agencies have estimated as many as 230,000 people in rebel-controlled areas have been displaced by the fighting and correspondents say that concern over their welfare is certain to rise as both the fighting and the rainfall gets worse.
The rebels have been fighting for a separate homeland for Tamils in the north and east since 1983 and about 70,000 people have been killed in the violence.
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