COLOMBO, May 5 (Reuters) - Sri Lanka's navy sank two of a fleet of 26 rebel boats in a clash off the island's northeast coast overnight, killing an estimated 10 insurgents, the military said on Saturday.

The clash with the Tamil Tiger rebels comes amid daily land and sea battles between the foes as a new chapter of a two decade civil war that has killed nearly 70,000 people since 1983, deepens. In a separate incident troops shot dead a suspected rebel in the northeastern district of Trincomalee.

"Two Tiger boats were destroyed in a naval battle last night as 26 of their boats were sailing south from (rebel-controlled) Mullaithivu," said military spokesman Brigadier Prasad Samarasinghe.

"Our navy Dvora (Israeli-built attack boats) have engaged them. We suspect 10 of them were killed, as they were two large boats," he added, saying four rebel suicide vessels were also sighted but got away.

The Tigers, who are fighting for an independent state in north and east Sri Lanka for minority Tamils, were not immediately available for comment and there was no independent confirmation. Analysts say both sides inflate enemy losses and play down their own amid a parallel propaganda war.

The attack comes after the military claimed it killed more than two dozen rebels since the weekend in a spree of clashes, and as analysts fear a war that has killed around 4,000 people in the past year-and-a-half alone is set to intensify.

It also comes after a rebel air raid on oil facilities north of the capital on Sunday which the Tigers have warned will be followed by more similar raids using their homegrown airforce of converted light aircraft smuggled into the country in pieces.

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