Two powerful land mine blasts targeted a naval road convoy on Friday morning, killing 12 travelling in a bus and injuring at least four others, the navy said.
About 30 sailors were traveling toward their base in Mannar district, 220km north of the capital, Colombo, when the explosion occurred, said Jayantha Perera, navy spokesman.
"We have found 12 dead bodies and four wounded have been evacuated," he said.
Perera said the bus caught fire after the blast.
Also on Friday, suspected Tamil Tiger rebels fatally shot a Sri Lankan army intelligence agent in the central Sri Lankan town of Nuwara Eliya, 180km east of Colombo.
It was the first known attack of its kind in the area, said Brigadier Prasad Samarasinghe, defence ministry spokesman, who blamed the Tigers for the killing.
The mine blasts came hours after the Tamil rebels claimed that three sailors believed to have been abducted by them in a sea battle on Thursday had drowned.
In a letter to the Norwegian-led cease-fire monitoring team, the Tigers denied allegations they had started the sea battle off the country's northwest coast.
The "Sri Lanka navy intercepted the (rebel) fleet and started firing," said the letter from S. P. Thamilselvan, the rebels' political leader, to Hagrup Haukland, the chief ceasefire monitor.
"We have found 12 dead bodies and four wounded have been evacuated"
Jayantha Perera, navy spokesman
"Our members had to return fire for self-protection," the letter said.
Sri Lanka's navy had said earlier that 10 rebel boats attacked two navy vessels on Thursday, sinking one and capturing three sailors.
The rebels' letter, however, said they had approached the sinking navy boat and found two sailors dead and one alive but seriously injured.
The attacks are the most serious violence to threaten the already-shaky 2002 government-rebel ceasefire that halted Sri Lanka's devastating two-decade war.
Violence has escalated in Sri Lanka's ethnic Tamil-majority northeast since rebel leader Velupillai Prabhakaran threatened to resume his struggle for an independent Tamil nation if the government fails to address grievances of the minority Tamil community.
An upsurge in violence has put
Sri Lanka's truce in doubt
During this month alone, 20 government soldiers were killed and many more injured in attacks blamed on the rebels.
The Tamil Tigers started fighting in 1983 for a separate homeland in the country's north and east for the island nation's minority ethnic Tamils, claiming discrimination by the majority Sinhalese.
The conflict killed about 65,000 people before the ceasefire.