Sri Lankan aircraft have "bombed and completely destroyed" a key naval base of the rebel Liberation Tigers of Tamil Eelam (LTTE) about 15 kilometres from the ocean, the defence ministry has said.
But the Tamil Tigers have denied the claim, saying there were no rebel installations in the area.
The Sri Lankan defence ministry said Israeli-built Kfir jets pounded the "Sea Tiger headquarters" at Puthukkudiyiruppu on Wednesday.
"The base was completely destroyed, including its fuel storage facilities, which burst into massive flames."
The LTTE said bombs fell near the offices of a charity that helps victims of landmines.
The rebels said the air force had bombed the same area on Tuesday and wounded four civilians who were admitted to the Puthukkudiyiruppu hospital.
Air raids
Sri Lankan jets have been routinely bombing suspected rebel positions in the island's northeast since April last year.
The air force suffered a humiliating attack last week when Tiger aircraft bombed its main base next to the island's only international airport in Colombo and escaped unchallenged.
The Tamil rebels have waged a 35-year campaign for independence that has claimed more than 60,000 lives.
More than 4,000 people have been killed in the latest surge in fighting that began in December 2005, despite a truce arranged in 2002.