"Civilians should not be used as pawns or human shields in this way."
Holmes also urged the government to stop shelling a narrow coastal strip where civilians are trapped between the army and the LTTE.
"I call on the government once again to live up to the promises they've made on repeated occasions not to use heavy weapons in this area," he said.
A pro-Tamil Tiger website reported on Wednesday that the military had attacked the group's fighters with mortar fire, artillery and heavy machine guns.
"It is impossible to assess casualty details, but at least 180 civilians are feared killed within three hours," TamilNet said.
Mahinda Rajapakse, the president, declared a 48-hour ceasefire on Monday and urged the LTTE to surrender and let civilians out.
The Tamil Tigers said the truce was too short and called for a permanent, internationally arranged ceasefire.
Brigadier Udaya Nanayakkara, a military spokesman, denied Sri Lankan troops had started fighting, but confirmed that they were back on active duty on Wednesday.
"We are observing the activities there. We have not commenced any offensive as yet, but the restricted period is over," he said.
Keheliya Rambukwella, a government minister and defence spokesman, said state forces had begun a mission to free trapped civilians rather than a military attack.
"This is more of a rescue operation, there is no question of an onslaught," he said on Wednesday.
"People won't see much of it. It will be a strategised system, we have formulated that strategy."
It is impossible to independently verify the two sides' claims as journalists are banned from the conflict zone and access for independent aid agencies is strictly regulated.
Sri Lanka says the LTTE is facing defeat, with just 1,000 fighters remaining in a small strip of land on the northeastern coast, after 25 years of fighting for an independent homeland for the ethnic minority Tamils.