Last month the EU listed the Liberation Tigers of Tamil Eelam (LTTE) as a banned terrorist organisation after an surge in violence on the Indian Ocean island where two decades of civil war have killed about 64,000 people.
"Members of the European Union cannot now be accepted as neutral," said SP Thamilselvan, LTTE political wing head, at a news conference in Oslo on Thursday where talks between the rebels and the Sri Lankan government were to be held.
The LTTE had earlier refused to meet a Sri Lankan government delegation they considered to be too low ranking for talks about the safety of the 57 Nordic monitors.
It would have been the first time since Geneva peace talks in February, now stalled, that both sides had met face to face.
Erik Solheim, Norway's minister for international development who brokered a 2002 ceasefire, urged the LTTE to reconsider its rejection of EU citizens as monitors.
"Norway cannot fill the vacancies," he said. "There will be two possible outcomes; either continue with a minimum set-up or we will have to approach other countries which have not banned the LTTE."
He said that could take up to six months to organise and would involve removing current monitor head, Swedish Major General Ulf Henricsson.
More than 400 people have died
since April in violence
The unarmed Sri Lanka Monitoring Mission (SLMM) is made up of staff from EU members Sweden, Denmark and Finland and non-EU states Norway and Iceland. Iceland and Norway would be left with 20 personnel.
At least three people were meanwhile killed in new violence on the island on Thursday.
More than 400 people have been killed since early April and many fear a return to full-scale civil war that has devastated the island's north and east, where the Tigers want a separate Tamil homeland.
The Nordic monitors had wanted to ensure their safety after being caught in several clashes between government forces and the Tigers.
They have angered both sides by accusing them of repeated ceasefire breaches.