Government troops of the 53 Division, advancing from Kilaly village near Jaffna, carried out the ambush in the morning, a defence ministry official said.
"Scores of LTTE cadres were killed in the attack, defence sources in Kilaly said citing intercepted terror radio communication channels," he said.
Also advancing from the south, troops marched into Olumadu in Mullaittivu district, an LTTE stronghold, in pouring rain.
Olumadu is located 4 km north-east of Mankulam on the Mankulam-Mullaittivu highway and falls in the area just on the outskirts of Kilinochchi.
The official did not give any casualty figures, merely saying that fierce fighting had lasted a few days.
Elsewhere, security forces continued their march towards the LTTE nerve-centre from the Jaffna side.
Sources said the Tigers were frequently reinforcing cadres deployed in areas along Muhamalai and Kilaly fronts, to keep the Lankan army in check.
The sources said heavy fighting was going on at three fronts outside Kilinochchi and that supplies, rations and buildup were in full sway apparently for a final lunge by the government troops on the Tiger bastions.
Quoting sources, the ministry said the LTTE was also busy building more earth bunds in Kilinochchi.
Troops of 53 and 55 Divisions engaged in fresh offensive are consolidating the areas captured while conducting further dominations ahead of their defences in Muhamalai, Kilaly and Nagarkovil areas.
Meanwhile, intercepted radio transmissions have revealed that a senior LTTE leader called Stanley was killed during the recent battle.
Army snipers deployed in Karadiankadu in the north also gunned down an LTTE militant on Monday afternoon, the army said.
In the meantime, troops operating in the north of Akkarayankulam in Kilinochchi, Andankulam in north-eastern Welioy conducted search and clear operations in Andankulam area and recovered five anti-personnel mines and two improvised explosive devices.
At Vavuniya, the International Committee of Red Cross took away the dead bodies found by the security forces, the army said.
Meanwhile, two soldiers were killed in eastern Batticaloa after suspected LTTE fighters detonated a claymore mine, the army said, adding that cordon and search operations are now on in the area.