The United Nations said 52 civilians have been killed and 80 injured in the past day in Sri Lanka's northern war zone.
U.N. spokesman Gordon Weiss also said cluster bombs struck Wednesday at the last functioning hospital in the area where Tamil Tiger rebels are fighting a last-gasp battle for survival.
He said 52 civilians were killed and 80 wounded in fighting Tuesday inside and outside a government-designated safe zone where it had pledged not to strike.
It was the first time cluster bombs were known to have been used in the government's push to defeat the Tamil Tigers since the collapse of a cease-fire in 2006.
It is the first time cluster bombs are reported to have been used since a Norwegian-brokered cease-fire broke down in 2006 and the government launched its offensive.
"We hold the gravest fears for the safety of our staff and their families," Weiss told reporters.
It was not clear who launched the cluster bombs.
The hospital is located in the rapidly-shrinking war zone where about 250,000 civilians are trapped along with the Tamil Tiger rebels, who had been fighting since 1983 for a separate homeland for the country's minority Tamils. About 70,000 people have been killed in the civil war between the rebels and the Sinhalese-dominated government.
The government did not immediately respond to the cluster bomb report, though the military previously has insisted that it has not targeted civilians.
All defense spokespeople were at a parade to mark the country's independence from colonial power Britain 61 years ago.
In a nationally-televised Independence Day speech from the parade viewing stand, President Mahinda Rajapaksa said many foreign governments had said it was not possible to destroy the Tamil Tiger rebels, who had built up a sophisticated military in addition to a suicide squad.
For nearly three decades "we were forced to celebrate independence with an illegal armed group operating in our country ... Today we have been able to nearly destroy terror," Rajapaksa said.
"Our heroic forces today have given us an opportunity to celebrate independence in a country nearly free from terrorism," he said in a speech from a heavily guarded beachfront promenade before watching a grand military parade.
In recent months, Sri Lankan troops have routed the Tamil Tiger rebels from most areas of the de facto homeland they had carved out in the north and the east for the country's minority Tamils. They are now cornered into a small area in the country's northeast and a defeat appears imminent
"At this moment I urge all Sri Lankans from all communities who fled the country because of the war to return to their motherland," Rajapaksa said. He did not elaborate but the reference was apparently to hundreds of thousands of minority Tamils who have sought political asylum in the West.
Heavy fighting is still raging in the sliver of land north of Mullaittivu town. Aid workers and other officials say they are getting reports of heavy casualties but the reports are impossible to verify independently because the government has banned journalists from going there.
The Puthukkudiyiruppu hospital has been hit continuously by a barrage of artillery since Sunday, leaving at least 12 people dead.
Dr. Thurairajah Varatharajah, the top health official in the war zone, estimated last week that more than 300 civilians had been killed in the recent fighting, something the government has denied. Varatharajah has not updated his estimate.
The government accuses the rebels of holding the civilians against their will as human shields, a charge the rebels deny.