Eleven Muslim youth, who were repairing the sluice gates of a water reservoir in Ratta Kulam near Pottuvil in South Eastern Sri Lanka, were hacked to death by unidentified men on Monday.
Blaming the LTTE for the "inhuman butchery", the Sri Lankan Army said that the youth were hacked and chopped to death by "marauding terrorists."
But the LTTE blamed Sri Lanka's elite Special Task Force (STF) for the killings and said a STF training camp was close by.
The LTTE's political leader for Amparai district said that the STF was indulging in such "sabotage activities" to create tension between the Tamils and Muslims of Amparai district.
Only one, a 55-year-old man, survived to tell the tale of the massacre. He was rushed to the Ashraff Memorial Hospital in Kalmunai.
All the dead were in the 15-25 age group.
Following the massacre, the Muslims of Pottuvil stoned STF and police vehicles, forcing the Security Forces to fire into the air to scare away the mob.
To prevent a communal conflagration, the Governor of Western Province and respected Muslim leader, Alavi Moulana, rushed to Pottuvil by air on Monday.
The local Muslims have formed a peace committee.
A top Muslim religious leader in Kalmunai told Hindustan Times that the incident might have been a sequel to a quarrel between the Sinhalas and Muslims over an attempt to build a house on land that was part of a Muslim graveyard.
But the pro-LTTE Tamilnet website quoted mosque sources in Pottivil as saying that a few days ago, there was trouble in the area when a bid was made by some Sinhalas to bury one of their dead in a Muslim cemetery.
Pottuvil has been seeing some Sinhala-Muslim tension lately, partly because of efforts by some Sinhala radical groups to put up Buddha statues in various Muslim localities.
Lahugala, in which the Rattal Kulam falls, is a Sinhala majority area, which had been carved out of the predominantly Muslim Pottuvil.