Defence ministry spokesman Prasad Samarasinghe says troops took control of the A5 road linking the town of Chenkaladi and Badulla in central Sri Lanka.
"Only about 140 square kilometres of jungle land in the Thoppigala area still remain under LTTE (Liberation Tigers of Tamil Eelam) control and we believe around 300 to 350 rebels are in the jungles," Mr Samarasinghe said.
He says the latest military advance, which began late February, has left nine soldiers and 184 Tiger rebels dead, with no civilian casualties.
Military action to wrestle the eastern region from the Tigers began last July when the rebels shut an irrigation canal and blocked water to around 15,000 residents in a farming village.
"The Tigers have lost 1,175 cadres, we lost 98 security forces personnel, while two other government soldiers still remain missing (since July)," he said adding around 138,000 people had been displaced since.
Elsewhere in the north, fighting between security forces and rebels continued for a third straight day across a front line at Omanthai, the main crossing point between government and Tiger-held territory.
The clashes erupted when rebels reportedly fired mortars at military positions late on Tuesday.
There were no details of any military casualties or any immediate word from the LTTE.
The military said the rebels were shelling government positions to obstruct the transport of supplies across the frontline.
Residents in the northern district of Vavuniya said three people were killed late on Tuesday when government troops opened fire, accusing them of being suspected Tamil Tigers. However, residents later identified them as civilians.
The government has refused to allow journalists into areas held by the Tigers although it says there is no formal censorship.
More than 4,000 people died between December 2005 and the first week of March 2007, including 675 civilians and 1,040 security personnel, according to defence ministry figures.
The LTTE has waged a 35-year campaign for independence that has claimed more than 60,000 lives.