A Tamil Tiger spokesman said on Thursday they were planning to return the 30 bodies of government troops they captured after the battle at Muhamalai on the Jaffna peninsula.
"Clearing operations are underway," LTTE spokesman Rasiah Ilanthiriyan said in a statement.
Hospitals in and around the capital Colombo were packed with wounded soldiers evacuated from Jaffna.
Even as the fighting subsided, security forces and Tigers traded fire elsewhere in the north of the island, the defence ministry said, adding that 32 Tigers had been killed in other clashes with troops on Wednesday.
Pictures released on pro-Tamil websites showed what was said to be soldiers who were killed inside a Tiger bunker line and 17 bodies of troops laid out on plastic sheets at an undisclosed location.
Defence sources said Wednesday's battle was a repeat of the October 2006 fighting, when security forces were pushed back by a major Tiger counter-offensive, leaving 129 government soldiers slain and 515 wounded.
The Tigers ran the Jaffna peninsula as a de facto separate state for five years until they were driven out in October 1995. However, they took back the southern part of the peninsula in April 2000.
The LTTE have been fighting to carve out an independent homeland for Tamils since 1972.
Tens of thousands of people have died on both sides in the conflict.