At least 28 civilians have been killed in the latest fighting between the Sri Lankan military and the Liberation Tigers of Tamil Eelam (LTTE), a health official said.
More than 160 others are being treated for wounds after being caught in the crossfire in the northeast of the island, an official at the only makeshift hospital in the conflict zone said.
The defence ministry reported that soldiers had killed eight Tamil Tiger fighters, but the statement made no mention of civilian casualties.
Brigadier Udaya Nana-Yakkara, a military spokesman speaking to Al Jazeera on Sunday, denied that fighting was going on in the "no-fire zone".
"There is no fighting going on in these areas. This is a 25km safety zone which the government has earmarked for the safety of the civilians.
"Even though we know the locations of their [LTTE's] guns and various equipment, we don't enter this location because we are concerned about the civilians."
Aid groups say more than 100,000 civilians are trapped between the army and Tamil Tiger fighters in the narrow coastal "no-fire zone".
The United Nations have accused the military of shelling the area, and the Tamil Tigers of preventing civilians leaving, effectively using them as human shields.
The United Nations says at least 4,500 civilians have been killed in the last three months of fighting, and another 12,000 injured.
Ceasefire calls
Meanwhile, the United Kingdom said it was gravely concerned about the fighting and had sent an envoy to the United Nations for urgent talks.
David Miliband, the foreign minister, said the conflict in northern Sri Lanka threatened many thousands of civilian lives and repeated his call for an immediate ceasefire to allow civilians to leave the conflict area.
"The UN are making progress with the government of Sri Lanka towards an agreement to get support to civilians in the conflict zone and on efforts to get agreement from the LTTE to allow civilians to leave," he said in a statement.
"The prime minister's special representative, Des Browne, is travelling to New York to consult urgently with the UN."
In Paris, at least 11,000 Tamils demonstrated on Saturday to demand a ceasefire in Sri Lanka.