A total of 15 people were killed following a fierce gun battle between Sri Lankan forces and an armed group in Kalmunai city, the military said on Saturday.
A military official told Xinhua news agency that terrorists opened fire when the Sri Lankan troops were attempting to raid a safe house used by the armed group affiliated to an Islamic terrorist organisation.
Some suicide bombers later blew themselves up inside the safe house.
Among the bodies recovered inside the house, were three men, three women and six children, the Daily Mirror reported.
Three more bodies of men suspected to be the suicide bombers were found outside the house.
Search operations are ongoing to see if more suspected terrorists are hiding in the surrounding areas and the entire area remains cordoned off.
A curfew is still in place in Kalmunai and its surrounding areas after it was imposed on Friday night.
Earlier on Friday evening, the military said security forces also had recovered flags belonging to the Islamic State, literature and some other objects from a house in the Ampara district also in the east, which is said to be the terrorist organisation's place for oath-taking.
On Friday, 10 people were arrested from across the country bringing the number detained since the Easter Sunday bombings to 80.
Sunday's explosions killed 253 people and injured over 500 in one of the bloodiest days in Sri Lanka since the civil was ended a decade ago.