The Sri Lankan military retaliated with air strikes deep inside territory held by the Tigers, the rebels said as the defence ministry said one war plane crashed into a lagoon near here Monday evening during a "training mission."
The government said the "barbaric" suicide attack, which coincided with heightened international efforts to restore a 2002 truce, meant the Tamil Tiger guerrillas were not interested in talks scheduled to take place next week in Switzerland.
The bombing occurred about 170 kilometres (105 miles) north-east of Colombo at a transit point in the restive district of Trincomalee for security personnel coming to and from the front line of the drawn-out conflict.
Only the chassis of the truck remained amidst more than a dozen buses parked in an open field where 340 sailors were waiting to leave for their destinations, officials said.
Rescue workers made a pile of automatic assault rifles and hard helmets of sailors who perished. The windows of buses parked there smashed.
The fate of dozens of civilian traders selling tea and sweets to the security personnel was not immediately known, police said adding that several civilians may have also died.
The government in a statement expressed "deep shock" over the bombing while the rebel Liberation Tigers of Tamil Eelam (LTTE) tacitly admitted they carried it out.
"When Sri Lanka air force bombers continue to bomb targets in Tamil homeland ... how could anybody expect the Tigers to refrain from targeting military installations," the pro-rebel tamilnet.com website quoted Tiger spokesman Rasiah Ilanthiriyan as saying.
He said there were unspecified civilian casualties in air attacks carried out by the military after the bombing.
"The truck had driven into the middle of the open ground, and then the explosives were detonated," a local police official told AFP by telephone. "There were about 15 buses."
Doctors said that 98 bodies were at the nearby Dambulla hospital, four more people died while being taken by road to a hospital in the major town of Kurunegala while another died at Anuradhapura hospital.
"This barbaric attack on unarmed sailors shows that the Tigers are not worried about international opinion," said government defence spokesman Keheliya Rambukwella, who is also the minister of policy planning.
"We are keen on negotiations, but the Tigers are not."
Last week, Tigers fiercely resisted a major military onslaught, killing at least 133 soldiers and wounding 500 in two hours of fighting, according to government figures.
The first suicide truck bombing against the security forces was in July 1987 when a truck loaded with explosives rammed into an army camp on the Jaffna peninsula, killing 40 troops.
Until Monday's attack the worst suicide bombing was in 1996 against the central bank building in Colombo which killed 91 and wounded 1,400.
Monday's blast came as Sri Lanka's key international backers moved to salvage a 2002 truce and arrange talks later this month.
Top Japanese envoy Yasushi Akashi on Monday met with President Mahinda Rajapakse and former chief peace negotiator Nimal Siripala de Silva.
Akashi was also expected to meet top LTTE leaders during his six-day visit.
Norway, the main peace broker in Sri Lanka, was planning to send special envoy Jon Hanssen-Bauer Tuesday to work out details for the October 28-29 talks in Switzerland.
The Tigers have said they would confirm whether they would participate in the talks when they meet Hanssen-Bauer in the rebel-held town of Kilinochchi on Thursday.
US Assistant Secretary of State Richard Boucher was also expected to meet Thursday with government ministers.

Copyright AFP (Agence France-Presse), 2006