"Six LTTE (Liberation Tigers of Tamil Eelam) attack boats were destroyed including two suicide craft during a heavy sea battle...
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at least 40 terrorists were killed during the hours-long sea confrontation," the ministry said.
The military did not give its own casualty figures but said one naval craft was damaged during an explosion when two rebel suicide boats were destroyed.
However, the rebels claimed they had sunk a navy fast attack craft and damaged two naval boats during the sea battle, the pro-rebel Tamilnet.
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com web site reported.
Both sides make sharply differing claims about casualties and independent verification is rarely possible.
The sea battle came as the navy earlier Wednesday detained a "suspicious" Indonesian vessel off the island's east coast