COLOMBO - Sri Lanka Monday gave the Tamil Tigers 24 hours to surrender or die after troops breached a huge earthen defense and unleashed an exodus of tens of thousands of civilians held there by the rebels, the military said.

Sri Lanka's quarter-century separatist war has come down to a tiny strip of coastline, where the Liberation Tigers of Tamil Eelam (LTTE) are making a last stand while urging a ceasefire to protect civilians they have refused to free.

With so many civilians now outside the 17 square km (6.5 sq mile) no-fire zone that is the only battlefield left, Sri Lanka warned LTTE founder Vellupillai Prabhakaran to surrender or face a last military showdown.

We have given a final warning to Prabhakaran and his terrorist group to surrender to the government forces within 24 hours from 12 noon, defense spokesman Keheliya Rambukwella told reporters at the air force battle management center in Colombo.

Thereafter will be a military course of action. That is the best option, Rambukwella said.

The military in the past has given similar ultimatums to the LTTE and it was not clear whether passage of the deadline would mean soldiers would immediately begin attacking.

The news of the exodus sent the Colombo Stock Exchange up 1.1 percent to a two-month high.

The LTTE could not be reached for comment, but the pro-rebel web site www.TamilNet.com reported hundreds of dead bodies and wounded civilians were still lying in Matthalan and Pokkanai, two villages in the no-fire zone.

A large number of the civilians fled toward LTTE-held areas while around 8,000 were trapped and captured by the (Sri Lankan army), it said, quoting its own correspondent.

It was impossible to independently verify the competing accounts since the battle zone is off-limits to most outsiders.

EXODUS STARTS

Prabhkaran, 54, and his fighters wear cyanide vials around their necks to be taken in case of capture. For decades, he has vowed no surrender in his single-minded fight to create a separate state for Sri Lanka's Tamils.

In London, expatriate Tamils blocked streets outside Britain's parliament demanding a ceasefire, the latest in two weeks of protests there and in other world cities by Tamils in the diaspora, long the LTTE's base of financial support.

With Asia's longest-running civil war now nearing its end, Sri Lanka will face the twin challenges of healing the divide between the Tamil minority and Sinhalese majority, and reviving a $40 billion economy suffering on multiple fronts.

The island nation is seeking a $1.9 billion International Monetary Fund loan to shore up a balance of payments crisis and boost flagging foreign exchange reserves, half of which were spent defending the rupee in the last four months of 2008.

Between 25,000 and 35,000 people fled Monday but counts were not finalized, said Lakshman Hulugalle, director of the military's Media Center for National Security.

Later, the military said another 2,000 came out by boat.

The largest single-day exodus so far, which should put the number of those fleeing LTTE areas this year at near 100,000, started after soldiers fought past an earthen berm blocking the biggest land route in and out of the no-fire zone.

Live video the military said was being beamed from an unmanned aerial vehicle into the battle management center showed thousands thronging around temporary reception centers set up by the army less than a kilometer outside the no-fire zone.

All of these small dots you see are human beings waiting to be checked, air force operations director, Vice Air Marshal Kolitha Gunatilleke, told reporters while displaying the footage.

That process is designed to weed out LTTE suicide bombers.

Nonetheless, three exploded themselves and killed at least 17 people and wounded 200 Monday, the military said.

Other video footage showed groups of hundreds of people sheltering on the beach, the surf washing up. The military had no details on how many civilians remain inside the no-fire zone.

Several thousand of those people later tried to flee out of the north of the no-fire zone but were being stopped by the LTTE, air force spokesman Wing Commander Janaka Nanayakkara said.

Enormous international pressure has been brought to bear against the government and the LTTE to hold fire long enough to let the civilians out. Before the exodus, credible estimates of the number inside ranged from 60,000 to as many as 150,000.

The United Nations has accused the LTTE of forcibly recruiting people to fight and of shooting those trying to flee, and the government of shelling civilian areas.

Both have denied the accusations. So far only the government has offered breaks in the fighting to let civilians come out, the latest of which was a 48-hour break during the Tamil and Sinhala new year period last week that the Tigers rejected as too short.

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