Sri Lankan forces have captured the Tamil Tigers' last major stronghold in the country's north, the army has announced, a victory that left the remaining rebel fighters confined to the tiny slice of jungle they still control.

Sri Lankans across the capital, Colombo, exploded in celebration, honking their horns and lighting fireworks at the news, as they have done several times in the past month as the military fought its way into what was once the rebels' de facto state.

While the major conventional battles appeared to be over, analysts said the army had a hard fight ahead of it to finish off the rebels, who are reportedly holed up in the nearby jungles among hundreds of thousands of civilians displaced by the fighting.

The capture of Mullaittivu came just three weeks after the army drove the rebels from their administrative capital of Kilinochchi and forced them to retreat from most of the de facto state they controlled across a wide swathe of northern Sri Lanka.

"The Sri Lankan army captured the Mullaittivu bastion completely," army chief Lieutenant-General Sarath Fonseka said in a speech broadcast on every major television channel.

Fonseka said the 25-year-old civil war was 95% over and appealed for new recruits to join the army and help complete the job.

Rebel officials could not be reached for comment because communications to the northern war zone have been cut. However, they have in the past expressed a willingness to return to guerrilla warfare if necessary.

It is impossible to verify the military's accounts because independent journalists are barred from the area.

"There is still a lot of work to be done," Sri Lanka's former army commander General Jerry de Silva said.

"It is likely they the rebels will resort to guerrilla tactics, both jungle and urban," he said, adding that the jungle canopy above much of the remaining rebel territory could mean that troops are likely to get little air support.

Defence spokesman Keheliya Rambukwella described Mullaittivu as the rebels' last bastion and main operations centre. The rebels took control of the town in 1996, when they overran a military camp there and killed almost 1000 soldiers.

The Tamil Tiger rebels have fought since 1983 to create a separate state for ethnic minority Tamils, who have suffered decades of marginalisation at the hands of successive governments controlled by the Sinhalese majority. More than 70,000 people have been killed in the violence.

The government of President Mahinda Rajapaksa has vowed to destroy the group and end the war.

Jehan Perera, an independent political analyst from the National Peace Council, said government forces could face an "enormous humanitarian and military challenge" in fighting the rebels amid a large number of civilians.

Human rights groups have expressed growing concern in recent weeks for the safety of the civilians reportedly living in the shrinking rebel-held area.

The groups have accused the Tamil Tigers of preventing the civilians from fleeing the war zone, while the government has said the rebels hoped to use the civilians as human shields. Reports of civilian casualties in the area have grown in recent weeks.

Last week, the government declared a 13.5 square mile "safe zone" on the edge of the rebel-held area and called for civilians to gather there.

However, regional medical officials accused the military of firing into a village and a hospital in the safe zone last week, killing at least 30 people and injuring more than 100. The government denied responsibility for the attack.