Sri Lankan President Chandrika Kumaratunga has placed security forces on a state of high alert, a spokesman said.
In 1995, security forces were put on alert after the ceasefire collapsed
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The move - taken at an emergency meeting overnight - follows Monday's decision by the Tamil Tiger rebel group to suspend peace negotiations in protest at the handling of "critical issues".
"The president is of the view that the reasons put forward by the [Liberation Tigers of Tamil Eelam or LTTE] for their withdrawal from the talks are feeble," Mrs Kumaratunga's office said in a statement.
The parliamentary opposition in Sri Lanka has written to the prime minister asking for parliament to be reconvened to discuss the Tigers' postponement.
In his first reaction to the news, the head of the government negotiating team, GL Peiris, told the BBC that the suspension did not mean the end of the peace process.
Hopes
He said it indicated clear differences of opinion which the government would not be able to compromise on simply to keep the peace process on schedule.
The United States expressed hope that the talks could resume soon.
US State Department spokesman Richard Boucher said: "We have seen the statement by the LTTE. We are awaiting more information. We continue to support the peace process. We hope the talks can resume soon."
Last month, Yashushi Akashi, Japan's special peace envoy to Sri Lanka warned both sides that they must make progress before a donor conference scheduled for June.
The BBC's Frances Harrison in Colombo says this latest development is a very serious blow to the peace process, which had made great headway in the last year.
She says it is clear Sri Lankan officials were taken completely by surprise by the Tiger move.
Government rivalries
The president's statement said security measures implemented in 1995 - when a 100-day ceasefire collapsed with a Tiger attack on the Sri Lankan navy - would be reintroduced "to ensure the safety and security of the people".
Then, roadblocks were quickly set up around the country, but this time there were no such immediately visible effects, reports say.
The Tamil Tigers have given no indication of a willingness to return to the two-decade war that culminated in a ceasefire in February 2002.
However, in suspending talks they did express serious grievances about their "marginalisation" from negotiations and the perceived unequal dividends of peace, such as patchy security withdrawals on the ground.
Five people died in fresh Tiger-Muslim violence in Sri Lanka last week
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They are also bitter about their exclusion from April's reconstruction talks in Washington - due to the ban on Tamil Tigers travelling to the US.
Mrs Kumaratanga said she was hopeful that "better sense would prevail" and the Tigers would re-enter negotiations, brokered by Norway.
But the situation is complicated by rivalries and divisions within the Colombo government.
The president's administration was forced into opposition after Prime Minister Ranil Wickramasinghe's party won 2001 parliamentary elections on the back of pledges to end the civil war.
Mrs Kumaratunga has at times been highly critical of her rival's handling of the peace process.
'Serious blow'
Five people were killed and hundreds fled their homes in riots between Tamils and Muslims in north-eastern Sri Lanka last week in a new escalation of violence.
The riots were sparked by an alleged Tamil Tiger kidnapping - an allegation the group denies.
Until the ceasefire, the Tamil Tigers had been fighting since 1983 for a separate state for Tamils in Sri Lanka's north and east.