About 1,400 rebels fled the base, which is about 375km (230 miles) north- west of Bangkok, shortly before dawn because they were not well armed enough to defend it against thousands of soldiers.
A Bangkok-based support group for the Burmese opposition, Burma Issues, said the "poison shells", interspersed with artillery, killed some defenders and caused disorientation and unconsciousness among others.
The Karen said two of their troops were killed and 12 injured in the overnight attack before the force retreated deeper into the Burmese jungle. According to Burma Issues, the wounded left behind were executed by government forces
The rebels, known as the Karen National Union, issued a statement in Bangkok saying they withdrew from the base to return to guerrilla warfare. The Karen are among about a dozen ethnic minorities that began fighting for sovereignty after Burma gained independence from Britain in 1948. With about 4,000 fighters, it is the largest and most important of the four groups still fighting for greater autonomy.
Last December, the Burmese junta, which put the opposition leader Aung San Suu Kyi under house arrest in 1989 and refused to hand over power after losing elections in 1990, broke the unilateral ceasefire it declared in 1992 to take advantage of a split in the Karen group.
Refusing offers to negotiate an end to the bloodshed, on 26 January the military seized Karen headquarters at Manerplaw, 200km north of Kawmoora, and forced about 15,000 people to seek refuge in Thailand.
The junta is seeking to crush the Karen for refusing to join a dozen other ethnic minorities in signing ceasefire agreements with Rangoon in return for development assistance.
The Australian Foreign Minister, Gareth Evans, warned South-east Asian countries during a visit to Thailand on Monday not to give Burma greater international recognition until it stops attacking the country's ethnic minorities.