The LTTE had been occupying Pooneryn since it dislodged government troops from the main military base there in November 1993.
There was no immediate comment from the Tamil Tigers, but the movement has conceded that many of their fighters had pulled into territory in the north of the country since the middle of last year.
Iqbal Athas, defence correspondent for the Sunday Times in Sri Lanka, told Al Jazeera that the move by the Sri Lankan army may not be very significant.
"In the context of this long-running war, it may not be that significant because there are many other rebel-held areas," he said.
"But it is worth considering now that the entire western coast is now in the army's control."
The Tamil Tigers had used the coastal area to launch artillery strikes against a military airbase on the northern edge of the government-controlled Jaffna peninsula.
The military claims that the LTTE smuggles arms, explosives and other supplies from the Indian state of Tamil Nadu, which is separated from Sri Lanka's northwestern coast by the narrow Palk Strait.
Brigadier Udaya Nanayakkara, a military spokesman, said: "We have completely taken over Pooneryn. We have gone up to the town, and control the roads from Pooneryn to Paranthan.
"We didn't find any artillery, because they must have taken those pieces away or hidden them."
Mahinda Rajapakse, Sri Lanka's president, gave a televised address on saturday to announce the capture of Pooneryn and the A32 main northwestern coastal road.
"This morning the entire A-32 road and Pooneryn was captured by our security forces," he said.
"On this occasion, I ask [Tamil Tiger leader Velupillai] Prabhakaran to lay down and immediately come for talks.
"The best thing he can do for the people in the north is to lay down arms and surrender."
In recent months, government-backed forces stepped up their offensive in a bid to capture the town of Kilinochchi, the LTTE's de facto capital, but bad weather and Tamil Tiger resistance has slowed those operations.
"Capturing Pooneryn is very significant, but now they have a more responsible task of securing the areas captured," Iqbal Athas, a Colombo-based defence analyst, said.
"The rebels are throwing all they have to secure Kilinochchi."
The military has stopped releasing its own casualties figures in daily bulletins since last month, but official figures tabled in parliament show that 1,269 troops had died in the first 10 months of this year.
The military claims it has killed more than 7,500 LTTE fighters since they pulled out of a Norwegian-arranged truce in January.
It is impossible to independently confirm casualty figures or details of military opeartions in the north of the island as the area is closed to journalists and the two sides often give widely differing accounts.