The separatist Tigers have been battling for a homeland for ethnic Tamils since 1972 and control much of the north and east of the country.
The Sri Lanka navy confirmed that the MV Invincible A-520 logistic vessel sank when an underwater explosion ripped through it.
It claimed the 65m vessel was empty at the time.
"No lives were lost due to the explosion," a defence ministry statement said.
Under a million residents in Batticaloa, Trincomalee and Ampara will cast their ballots on Saturday to elect officials to run the eastern provincial council.