A ministry spokesman said 74 soldiers and about 100 rebels were also seriously wounded.
The battle started when soldiers tried to move from the Muhamalai defence line on the northern Jaffna peninsula and advance into an area held by the Liberation Tigers of Tamil Eelam (LTTE).
The spokesman said 52 Tiger rebels and 15 government soldiers were killed in the clashes. However a military source told AFP that the security force casualties were 20 dead and 160 wounded.
There was no immediate word from the Tigers about casualties.
Both sides announced that heavy fighting broke out under the cover of darkness and raged for several hours.
Meanwhile, security forces killed at least nine rebels in the north of the island on Tuesday, the defence ministry said, placing its own casualties at 10 soldiers injured on that day.
The LTTE have been fighting since 1972 to carve out an independent homeland for minority Tamils in the north and east. Tens of thousands have died on both sides.
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