The Sri Lankan government decided on Wednesday not to ban separatist Tamil Tiger rebels at a crucial Cabinet meeting called after a suspected rebel suicide blast targeting the country's defence secretary, officials close to the Cabinet said.
A formal announcement is likely to be made later on Wednesday, when the government is also expected to outline new counter-terrorism measures, the official said, requesting anonymity.
The current Prevention of Terrorism Act provides state security forces sweeping powers to detain anyone without a warrant for six months, raid any home, structure and even demolish properties considered a threat to national security.
However, it has not been strictly enforced.
The Liberation Tigers of Tamil Eelam - which claims to be fighting on behalf of the country's 3.1 million ethnic Tamil minority -- is banned in the United States, Britain, Canada, EU and neighbouring India.
Their supporters had warned that a ban would effectively scupper a peace process that has already come under increasing strain amid a spike in violence this year that has killed at least 3,500.
The Cabinet met on Wednesday for an extraordinary meeting to discuss whether to re-impose a ban on the Tigers following a suicide bomb blast on Friday that killed three people, including the bomber, and wounded another 14.
It is thought the target of the attack was Defence Secretary Gotabhaya Rajapaksa, who is also the president's brother.
The government has blamed the rebels, who are renowned for using suicide bombers in attacks against the government.
The government first banned the LTTE in 1998 after the rebels exploded a truck bomb, badly damaging the Temple of Buddha's Tooth Relic, a sacred place for the island's predominantly Buddhist majority.
It lifted the ban in September 2002, as part of confidence-building measures after the two sides signed a Norway-brokered ceasefire in February that year.
Norwegian peace envoy Jon Hanssen-Bauer had planned to travel to the northern rebel stronghold of Kilinochchi on Monday to discuss the faltering peace process, but delayed the trip -- on the request of the government -- until after Wednesday's Cabinet meeting.