The earth wall had blocked the widest land link to the coastal strip where Sri Lanka's military has surrounded the remaining separatists.
Al Jazeera's David Chater, reporting from Colombo, quoted the Sri Lankan defence minister as saying just 200 Tamil Tiger fighters were left in the area.
"He said the operation was going to be very carefully controlled to try and limit the number of civilian casualties," Chater reported
"He said Tamil villagers are being trapped, kept as human shields by the Tamil Tigers, and evidence of that has come out today as we heard there has been a suicide bombing as these 5,000 civilians were brought out.
"We hear that at least 17 people have been seriously injured."
Brigadier Nanayakkara denied that there had been an explosion.
"That's an exaggerated story. There has been no suicide attack in the area."