Sri Lanka's military on Thursday accused the Tamil Tiger rebels of using civilians as human shields in the eastern town of Batticaloa, as artillery allegedly killed a soldier and civilian in the country's latest violence.

Batticaloa has come into sharp focus after military shelling killed at least 23 minority ethnic Tamil civilians last week, according to foreign cease-fire monitors. The rebels say 60 were killed.

"The Tigers are holding the civilians at gunpoint" and using them as human shields, military spokesman, Brig. Prasad Samarasinghe said on Thursday.

Samarasinghe said that 269 civilians have fled the area and made it to government-controlled positions in the past two days, and that they were being sheltered in camps.

The rebels denied using civilians as human shields, and said the latest military shelling has killed a civilian and wounded two others.

"The Sri Lankan armed forces have begun another large-scale offensive" in eastern Sri Lanka, the rebels said in an e-mail, accusing the military of occupying two schools and turning them into military camps.

Samarasinghe said the military was "conducting defensive actions with the intention of neutralizing the LTTE artillery and mortar" positions in the area, a hotbed of violence between the army and the separatist Tamil Tigers, formally called the Liberation Tigers of Tamil Eelam.

He accused the rebels of firing artillery at military positions, and said a soldier hit by artillery fragments has died.

Increasing violence has killed more than 3,200 people this year and all but shattered a 2002 cease-fire in Sri Lanka, a tropical island nation off southern India.

The rebels demand a separate homeland for the ethnic Tamil minority, citing decades of discrimination by the majority Sinhalese. The government says regional autonomy is the most it will give.