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"The troops of the 58 Division, 53 Division and Task Force 4 have entered into the Puthukuduiruppu town limits," the Medai Center for National Security said in a short statement.
Military spokesman Udaya Nanayakkara said the troops entered Puthukudyiruppu from west and south directions.
Nanayakkara said they have found attack craft, weapons and other equipment of the rebel Liberation Tigers of Tamil Eelam (LTTE) in the town.
Meanwhile, the LTTE said on its official website that at least 10 Tamil civilians were killed and 25 more injured on Tuesday by the troops' artillery fire in the remaining LTTE-controlled area.
Puthukudyiruppu is the last area controlled by the LTTE after it suffered repeated military defeats at the hands of government troops and lost more than 15,000 sq. km since 2006.
The Sri Lankan government and the international community have condemned the rebels of using the Tamil civilian population as human shields in the fight against government troops.
The military say they are on the brink of crushing the LTTE's remaining power to end the island's over three-decade-old separatist armed conflict.
The United Nations and the United States have expressed concerns on the plight of civilians trapped in the battle zone and called for political discussions to resolve the conflict.
The LTTE sought to set up a separate homeland for the minority Tamil community in the north and east claiming discrimination at the hands of the Sinhalese majority ruling community.
More than 70,000 people have been killed in Asia's longest civil war since the LTTE launched their armed campaign in the mid-1980s.