Only a handful of small coastal villages that remain in the hands of the LTTE, according to the military.
Troops also reportedly seized a 1.5km stretch of Tamil Tiger bunkers in an area east of the town and destroyed 10 boats belonging to the Sea Tigers, the separatists' naval unit.
The army has driven the Tigers into a small area of jungle in the north-east over the past few weeks.
The offensive has raised alarm over the safety of tens of thousands of civilians trapped in the war zone.
John Holmes, the UN humanitarian chief, said on Saturday: "[Civilians] now face very great danger from fighting between the Sri Lankan government forces and the LTTE and there is strong evidence the LTTE are preventing them from leaving."
The International Committee of the Red Cross said last month hundreds of civilians had died in the fighting.
|Hundreds of thousands of civilians have been trapped in the conflict zone [Reuters]
Thousands of people, including Tamil, Sinhalese and Muslim civilians, are estimated to have been killed since fighting escalated after 2005.
Thousands more have been displaced.
The LTTE is fighting for a separate Tamil homeland in Sri Lanka's north, claiming Tamils have suffered years of discrimination by the country's Sinhalese majority.
More than 70,000 people have been killed in the fighting since Sri Lanka's civil war began in 1983.