A Tamil Tiger rebel boat exploded during a clash with the Sri Lankan navy off the island's northwestern coast on Friday, naval sources said.
"There is a confrontation at sea," the source said. "We have retaliated and one of their suicide boats exploded." He said he had no details of casualties.
Other sources said two naval patrol boats had seen two Sea Tiger boats close to Liberation Tigers of Tamil Eelam territory in northwestern Mannar district. The sources said the rebels shot at the boats, which returned fire.
Two more Tiger vessels then appeared, the sources said, and the navy also fired on them. One of the newly arrived rebel craft exploded, suggesting it was a suicide attack boat, they added.
The government says it still hopes talks can take place with the rebels next week in Geneva, but the rebels pulled out of talks indefinitely last month, and the two sides cannot even agree the transport of eastern rebel leaders to a pre-talks meeting.
Last week, the military launched air strikes on rebel territory after a suicide attack on army headquarters in the capital. The strikes ceased after two days, but hawkish elements in the government are said to want them restarted.
More than 200 people have died in the past month in suspected rebel attacks, ethnic riots, killings and air and artillery strikes, raising fears that a 2002 truce might fail and civil war return.