Military spokesman brigadier Udaya Nanayakkara said the civilian safe zone (CSZ) was made smaller as fighting was raging on the outskirts.
The guerrillas have been confined to a five-square-kilometre (two-square-mile) area in the district of Mullaittivu and only three square kilometres of that would be the new "safe zone," Nanayakkara said.
"The new civilian safe zone is an area which is two kilometres long and 1.5 kilometres wide," he said.
Security forces have pinned down the Tigers in the small patch of land after nearly three years of heavy fighting which saw the dismantling of the de-facto state of the Tigers, who once controlled one third of the island.
The military estimates that up to 20,000 civilians are trapped in the small area where the Tigers are resisting a military advance.
The United Nations has said nearly 50,000 civilians could be trapped by the fighting.
The government has said its forces will not fire into the "safe zone." However, the rebels have given no such