The UN estimates that 50,000 civilians continue to be trapped between the army and the separatists known as the Liberation Tigers of Tamil Eelam (LTTE).
The army said LTTE fighters were putting up stiff resistance despite being cornered into an area smaller than 12 sq km on the northeast coast, ignoring calls for their surrender.
Neighbour India called on Sri Lanka's government to halt its military campaign on Thursday.
Pranab Mukherjee, India's foreign minister, expressed "deep concern and anxiety" for "the conditions of Tamil civilians in the conflict zones".
"We are very unhappy at the continued killings in Sri Lanka. All killings must stop. There must be an immediate cessation of all hostilities," he said in a statement.
The Indian government said it would send two emissaries to Colombo to push for a truce.
The move comes as political parties continue to clamour for a ceasefire in the southern state of Tamil Nadu, which with a population of about 60 million Tamils is closely linked to Sri Lankan Tamils across the Palk Strait.
Often blamed by Tamils for aiding the Sri Lankan government's efforts against the LTTE, India's ruling Congress party appears to be trying to strike a delicate balance.
It wants to appease political allies and win votes in Tamil Nadu in the current national elections, but cannot be seen as going soft on the Tamil Tigers, blamed for the assassination of Rajiv Gandhi, a former Indian prime minister.
The UN assistant secretary-general for humanitarian affairs, Catherine Bragg, said on Thursday that about 95,000 people had fled the war zone to reach refugee camps, but estimated that 50,000 more remained trapped.
She stressed, however, that "all these are estimates, we don't have exact figures".
David Chater, Al Jazeera's correspondent near Kilinochchi in the north, said: "We know that 103,000 Tamils have been processed through all the checkpoints and sent to IDP [Internally Displaced Person] camps.
|The UN estimates 50,000 are still trapped in the war zone but Sri Lanka says 20,000 [Reuters]
"At the moment, the army are pushing to encircle the remaining Tamil Tigers ... moving along the beaches to separate them from the ocean," he said.
The Sri Lankan army blames the LTTE for trapping about 15,000 to 20,000 civilians, and said their surrender was the only way they could be freed.
"Most of the refugees I have spoken to in the last week said they were shot at [by the LTTE], and mortars were used to keep them at bay," Al Jazeera's Chater said.
"[The LTTE] still have a lot of heavy weaponry, and they have no shortage of ammunition," he said.
"But they have very little option. It doesn't appear they are going to surrender. It does appear they are going to make a last stand."