Colombo  - President Mahinda Rajapaksa renewed his call for Tamil rebels to lay down weapons and enter the political mainstream after government troops captured a key coastal town in northern Sri Lanka Saturday.

"Our troops have made a significant victory. Even at this moment I call the LTTE (Tamil rebel) leader Velupillai Prabhakaran to surrender and come for negotiations," Rajapaksa said in a nationwide address after the army announced it had taken control of Pooneryn, 360 kilometres north of the capital.

Rebels of the Liberation Tigers of Tamil Eelam had controlled the area since ousting the army in 1993, and used it to smuggle military hardware from the south Indian coast.

The northern Jaffna peninsula was at times targeted by the rebels with their heavy weapons placed in Pooneryn.

Government troops have been fighting their way along the northern coast for the past 10 months, and have captured some strategic inland zones as well.

Residents in the south lit fireworks after the announcement of the military victory. Radio and television programmes were interrupted to broadcast the army's notice.

The government said it has killed more than 7,500 Tamil rebels while losing over 1,200 soldiers and police this year. (dpa)