More than 150,000 people are being shelled daily and are running short of water and medicine in a Sri Lankan-government declared "No Fire Zone", according to witness reports and United Nations briefing documents obtained by the Guardian.

Tens of thousands of people are caught between the last 1,500 fighters of the Liberation Tigers of Tamil Eelam (LTTE) and the advancing troops of the Sri Lankan army. The civilians are trapped on a thin strip of land - estimated at 13.5 square miles (35 square kilometers) - on Sri Lanka's north-east coast.

The UN warns that if people stay they risk being killed by government shells and if they try to leave they will be in danger of being shot by the Tigers. Diplomats say there is a real danger that a bloody denouement to the 25-year-old civil war could result in an "all-out humanitarian catastrophe".

Senior UN officials in Sri Lanka have shied away from publicly criticising the government in its hour of victory. In private, many argue that outspoken criticism may backfire and see foreign aid agencies expelled at the time of greatest civilian need.

Sri Lanka has ignored calls for a ceasefire, saying that the Tigers want mass civilian deaths to spark pressure for a truce. Diplomats in Colombo say the Tigers' plan is to provoke a bloodbath and call for international intervention.

UN figures show there are more than 60 deaths a day due to army bombardment and more than 3,000 lives have been lost since the end of January.

The doctor in charge of the makeshift hospitals in the No Fire Zone, T Sathiyamoorthy, told the Guardian that civilians were being "repeatedly shelled for no reason". The army's bombardment had seen bodies pile up in the safe zone - and local staff of aid agencies working in the government safe zone were among the dead.

"We have been hit this morning ... 52 people were injured, there were also deaths. Five, six people [die] at one time. I have seen hundreds of dead people," said Dr Sathiyamoorthy, who is a regional director of health services. "We are living in bunkers. My home was bombed early in the morning." Patients were sleeping on mats on the floor of the hospital building. "There's a severe shortage of medicines. We only have 10% of what we need. The government are not ready to send medicines to the area. Contaminated water is a big problem here."

The Sri Lankan government said Dr Sathiyamoorthy was likely to have been pressurised into giving interviews that support the "terrorist position". He denied he was speaking under duress.

There are only three rudimentary medical facilities now operating in the No Fire Zone, and the UN says they are dealing with 5,000 patients a day. In an operational note to aid agencies, the UN said supplies of food, clean water and medicines were running perilously short. It calculates the population urgently needs another 2,500 tonnes of food in the next month and an extra 1.5m litres a day of water.

The government says it has been providing food and aid by land and sea for displaced people in the north, and the military is making every effort to avoid civilian casualties. It disputes the UN figures and says that information from pilotless drones reveals only 70,000 people living in the No Fire Zone.

Ministers have been angered by the UN claims about the number of deaths and at claims by the UN high commissioner for human rights, Navi Pillay, that the actions by the warring parties "may constitute violations of international human rights and humanitarian law".

Palitha Kohona, the country's foreign secretary and a former UN diplomat, said the international community should "acknowledge that this humanitarian crisis was created by the LTTE [which has] herded thousands of people and places heavy guns among the people. If the LTTE lets the people go there will be no humanitarian crisis. We have enough firepower to lay waste from one end to another in one night. We have not done so."

He said that international law does permit a "proportionate response" when forces come under fire from Tamil Tiger positions. "This is not a situation comparable to Darfur or the western Congo. This is a terrorist organisation holding its own people as hostages."

There is little doubt that these are desperate times for the LTTE, which has been fighting for a separate homeland in the north and east of Sri Lanka for the past quarter of a century. The LTTE has been declared a terrorist organisation by the United States, the European Union and India.