A naval base in Sri Lanka's southern port city of Galle was attacked on Wednesday morning, said the military.
The Media Center for National Security said the attack made by suspected Tamil Tigers took place around 7:45 a.m. (0215 GMT) without elaboration.
The naval base is about 100 km south of the capital Colombo.
Local residents said multiple explosions were heard from the Galle harbor which defense officials described as under water explosions.
The Liberation Tigers of Tamil Eelam (LTTE) rebels then kept on firing at the adjoining naval base with rocket propelled grenade fire and engaged the troops in battle.
Military sources said gunboats had been sent to the port to counter the attack.
The incident comes two days after the country's worst suicide bombing which killed 99 sailors and injured 116 others in the North Central Province.
The attack happened as the special Japanese peace envoy Yasushi Akashi is visiting the rebel held Kilinochchi district in the north to have talks with the LTTE leadership on the proposed direct talks to be held in Switzerland on Oct. 28 and 29.
Source: Xinhua