The attack began with a ground assault with artillery fire and an air raid with the intention of causing severe damage to air force assets.
Radar picked up the signal from two LTTE planes as they approached. Fighter planes from the Katunayake air force base intercepted the in-coming enemy planes, downing one near Mullaittiyu, said military spokesman Brig Udaya Nanayakkara.
According to official sources at least 10 soldiers were killed and 15 wounded, mostly from artillery fire. No information is available about rebel casualties. The LTTE has not released any statement.
Lights and sound from anti-aircraft fire were visible from the nearby city of Vavuniya, where witnesses said the clash lasted about 20-30 minutes.
Recently Tamil Tigers have carried several air raids. Last month they struck a naval base in Trincomalee, killing four.
For experts the rebels are trying to stop increasing air raids by the Sri Lankan air force in the northern part of the country.
Although there are no hard figures about LTTE aircraft capabilities, satellite photos show several airstrips in the area under rebel control
Yesterday the government ordered all humanitarian workers to leave the area, saying it could no longer guarantee their safety.
NGOs are often the only support for tens of thousands of displaced people who lack shelter and means of support.