COLOMBO, SRI LANKA, DEC. 27 -- At least 23 civilians were killed today after Tamil rebels killed an off-duty police officer and then battled police and Indian soldiers in a fierce gunfight in the eastern port of Batticoloa, authorities said.

Government Agent K. Selvaratnam, the most senior official in Batticoloa, which is 190 miles east of Colombo, said 15 others were wounded in the fighting there, and more than 250 young Tamils were held in mass arrests prompted by the combat.

Selvaratnam said members of the Liberation Tigers of Tamil Eelam, the strongest group fighting for a Tamil nation in Sri Lanka's north and east, fired at several off-duty police officers shopping as stores opened after the Christmas break.

The gunmen killed one officer and wounded two others before police reinforcements forced them to retreat into the mostly Tamil market, Selvaratnam said.

A heavy exchange of gunfire ensued for about an hour, with the adversaries firing bullets across the bazaar, crowded with about 400 shoppers.

Witnesses contacted by telephone said the rebels hurled grenades, but the police, with the backing of Indian peace-keeping troops, forced them to retreat under fire that claimed civilian lives.

An official spokesman in New Delhi denied any involvement of Indian troops. A force of 25,000 Indian soldiers was sent to Sri Lanka on July 30 to enforce a peace plan designed to end ethnic warfare between minority Tamils and majority Sinhalese.

The Press Trust of India said the police, who were mostly Sinhalese, dragged Tamils from shops and killed them on the streets, picked off civilians riding past on bicycles and set about 15 stores on fire. There was no immediate confirmation of the report.

{Eighteen bodies were taken to the main hospital in Batticoloa, according to a hospital spokesman who spoke on the condition of anonymity, The Associated Press reported. He said seven of the 11 people admitted were in critical condition.}

The July 29 Indian-Sri Lankan peace accord was aimed at ending the four-year civil war by granting limited self-rule from Colombo to the country's minority Hindu Tamils, many of whom charge discrimination by the Sinhalese.

In recent weeks, pressure has shifted to the ethnically mixed Eastern Province, where Tamils are the largest minority but do not make up a majority because of sizable communities of Sinhalese and Moslems. Tamils make up 18 percent of the Sri Lankan population of 16 million.