Gunmen from the Liberation Tigers of Tamil Eelam (LTTE) overran the village of Kirimetiya on Saturday evening and began shooting at residents, the ministry said.
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"The LTTE terrorists have stormed the Kirimetiya village and opened fire at civilians indiscriminately," the ministry said in a statement, adding the villagers were mainly farmers.
The motive for the killing was unclear, but the ministry said the Tiger guerrillas were known to target members of the majority Sinhalese community in the multi-ethnic region.
The report of the massacre came a day after Tiger rebels flew light aircraft into the capital and staged a suicide bombing against the main tax office there.
The guerrillas lost their mini state in the north-east of the island to advancing government forces earlier this year. The remaining rebels are facing a major onslaught aimed at defeating them after 37 years of fighting.