Prabhakaran has successfully eluded capture since Sri Lanka's civil war began over two decades ago.
Officials said they were using spy planes that monitored satellite phone transmissions and took photographs of the jungle region to try to pin-point Prabhakaran's location.
Brigadier Udaya Nanayakkara, a military spokesman, said: "We are hunting for him, and using every method [to find him]."
The military has also set up a naval blockade off the country's northeast coast to prevent Prabhakaran from escaping.
Gotabhaya Rajapaksa, Sri Lanka's defence secretary, said in a TV interview last week: "If he has not fled the country already, we will be able to capture Prabhakaran very soon."
MR Narayan Swamy, an Indian journalist who wrote a biography of the LTTE leader, said the loss of Prabhakaran would be devastating to the group.
"He is their brain. He is their heart. He is their god. He is their soul, and the whole organisation runs around him," he said.
In recent weeks, Sri Lanka's military has captured much of the Tiger's territory, with Kilinochchi, the Tiger's de facto capital, falling earlier this month.
The fighters still control a 40km stretch of coastline off of Mullaitivu, but the navy says it has set up four layers of naval barriers to restrict LTTE boat movement.
The defence ministry said a navy fast attack craft was damaged in the sea battle on Tuesday when a Tiger suicide boat detonated next to it.
A conflicting report on a pro-Tamil website said that fighters carried out a suicide attack and sank a navy fast attack craft.
The navy denied that their craft had sunk.
Sri Lanka's government pulled out of a Norwegian-brokered truce with the Tigers a year ago and has since embarked on its most determined effort yet to dismantle LTTE territory.
Mahinda Rajapaksa, Sri Lanka's president, has said that his troops are on the verge of victory and that he will not accept anything short of total surrender from the Tigers.
More than 70,000 people have been killed in the conflict so far.