The minister, P. Chidambaram, said while New Delhi backed Sri Lanka's sovereignty and territorial integrity, military action would not bring an end to the rebels' drive for a separate state for minority Tamils.
"Senseless acts of terror on the one side (by rebels) or planned operations by the armed forces on the other side will only result in more death and destruction," Chidambaram said.
"Neither side can finally prevail over the other through conflict. Peace must be forged at the negotiating table," he said in a lecture to honour slain Sri Lankan foreign minister Lakshman Kadirgamar, killed in a 2005 attack.
"India has emphasised that the ethnic conflict in Sri Lanka ... should be resolved through a negotiated political settlement that includes a credible devolution of powers," he added.
India tried to help broker peace in Sri Lanka in 1987, but ended up fighting Tamil Tiger rebels for nearly three years till Indian troops withdrew in March 1990.
Since then, New Delhi has adopted a h