Hours earlier, military aircraft had bombed suspected Tiger artillery positions in the same region, the defence ministry said.
Fighting between government forces and the LTTE has intensified since the government formally pulled out of a six-year-old ceasefire pact in January, although clashes have been frequent since 2006.
Al Jazeera's Minelle Fernandez, reporting from Colombo, said it has been a violent week in the country.
Dozens of LTTE fighters were killed this week in fighting in the Jaffna Peninsula in the far north.
"Unfortunately this has culminated in many civilian deaths," she said.
While there has been no claim of responsibility by the group, Mahinda Rajapakse, Sri Lanka's president, said Friday's bus bomb attack just outside the capital Colombo was the work of Tiger separatists.
At least nine people were arrested in connection with the attack, and the government has told residents in the area to prepare for further similar attacks.
Meanwhile, the military on Saturday mounted a fresh assault against Tiger positions in the Welioya region. Tigers said they were resisting a "large-scale" offensive by troops.
The LTTE has been fighting to carve out an independent homeland for the Tamil minority since 1972. Tens of thousands of people have died on both sides of the conflict.