Rival factions of the Liberation Tigers of Tamil Eelam on Friday exchanged heavy gunfire in north-eastern Sri Lanka in the first major clash since the split in the rebel movement.

Following the clash the Sri Lankan government declared a red-alert.

Cadres of the main Liberation Tigers of Tamil Eelam and men controlled by renegade commander V Muralitharan alias Karuna fired mortars and small arms fire for nearly two hours across the Verugal river, military officials said.

"There are no signs of casualties brought to government-controlled hospitals on either side at the moment," a military official said. "But it looks like both suffered casualties."

Muralitharan, commander for the eastern districts of Batticaloa and Ampara, broke away from the leadership of the LTTE on March 3 sparking fears of a factional war.

Both sides had up to 1,000 fighters each deployed along the banks of the Verugal, which marks the border between north-eastern port districts of Trincomalee and Batticaloa.

Karuna, as Muralitharan is known, had accused the main LTTE leadership of sending intelligence operatives to the region to start a clash.

There was no immediate comment from either of the rebel factions.

"The military and the police have sounded a red alert after the heavy overnight exchange of fire by the Tigers," an official said.