"It was a parcel bomb fixed in an island in the middle of the road," a military source, who also asked not to be named, said.
He said the attack bore all the hallmarks of the Liberation Tigers of Tamil Eelam (LTTE), also known as the Tamil Tigers.
"It is definitely by the Tigers," he said.
There was no immediate claim of responsibility.
Mahinda Rajapaksa, the Sri Lanka president in January formally scrapped a six-year truce in the country's 25-year civil war with the group which is fighting for an independent homeland in the north and east of the island.
The bombing on Monday came as residents in the eastern district of Batticaloa voted for the first time in more than a decade.
As the polls for one municipal council and eight local government bodies opened, thousands of troops and police stood guard at razor wire checkpoints and patrolled in armoured vehicles to prevent attacks.