"We are deeply committed to the peace process," Prabhakaran said on Thursday in his annual speech honouring rebel war dead.
But he stressed that "if the Tamil people continued to face oppression, we have no alternative other than to secede and form an independent state."
The Heroes' Day of the Liberation Tigers of Tamil Eelam is a big event in the rebels' calendar and the rebel-held north was festooned with Tiger flags and pictures of the war dead to mark the occasion.
Delivering his speech on the day, Prabhakaran said the political power struggle between President Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe "severely endangered" the peace efforts.
In his speech broadcast on the clandestine Voice of Tigers radio, the reclusive rebel leader denied Kumaratunga's charge that the rebels have been using the existing truce to prepare for a renewed fight.
Though the peace process in the island-country has sputtered, a ceasefire between the government forces and the rebels has been holding since February last year.
"If the Tamil people continued to face oppression, we have no alternative other than to secede and form an independent state"
Tamil Tiger leader
"These false accusations are levelled against us to tarnish the credibility of our liberation organisation," Prabhakaran said.
"There is absolutely no truth in President Kumaratunga's accusation that we are preparing for war by procuring weapons, recruiting on a large scale and strengthening our military machine," he said.
The rebel leader also criticised Prime Minister Wickremesinghe, saying the six rounds of peace talks had not improved the conditions of the Tamil minority.
"Ranil's administration was only interested in projecting the peace process as an ideal model to attract aid and loans," Prabhakaran alleged.
Sri Lanka's long-drawn conflict between the Sinhalese-dominated government in Colombo and the Tamil rebels in the north have claimed around 64,000 lives till date.
Prabhakaran said draft proposals the rebels recently submitted for an interim administration did not constitute the foundation for a separate state and that they were intended as a basis for negotiation, not a final agreement.