"The allegation that the Sri Lanka Army's shelling had killed hundreds of families at St Antony's Ground, Iranapallai, is completely baseless," military spokesman Brig Ruwan Wanigasooriya said.
The US Embassy's official Twitter handle uploaded a photo with a caption saying, "St Anthany's Ground-site of Jan 2009 killing of hundreds of families by (Lankan) army shelling."
Sri Lanka has for long dismissed accusations that its army had fired shells at civilian locations during the final phase of the civil war.
Wanigasooriya said that according to people who live in that area, the LTTE had used the ground as a place to hand over bodies of their cadres who succumbed to injuries sustained in fighting.
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"They also confirm that there never was an incident of shelling on this ground when civilians were present. It is surprising to see a baseless allegation of this nature being released by the US Embassy without any credible verification," he said in a statement.
Stephen J Rapp, US Ambassador-at-Large at the Office of Global Criminal Justice, is on a two-day visit to Jaffna - the area that saw the worst of the nearly three-decade-long war - as part of his visit to the country.
The embassy's move comes ahead of the third US sponsored resolution on Sri Lanka to be moved at the UN Human Rights Council in March. Two previous resolutions were adopted with India's support. Both called for expeditious action to achieve reconciliation with the Tamil minority.
A protest was sparked when Rapp told the main Tamil party TNA that the March resolution would push for a international war crimes investigation.