Jihad Makdissi, spokesman for Syria's Foreign Ministry, said seat least 37 fighters and two civilians were killed in clashes during a security force campaign against the town in central Hama, from which the government said rebels were launching attacks on other areas.
Activists' estimates of the death toll ranges from 100 to 220, many of them whole families in the village of Tremseh, where United Nations monitors say there was heavy fighting on Thursday.
"Government forces did not use planes, or helicopters, or tanks or artillery. The heaviest weapon used was an RPG (rocket propelled grenade)," Makdissi told reporters at a news conference in Damascus.
"What happened was not a massacre ... what happened was a military operation. They were clashes between security forces, whose duty is to defend civilians, and heavily armed forces that don't believe in a political solution."
Syria has become mired in a bloody revolt against President Bashar al-Assad that is now in its seventeenth month. Some foreign officials now say the uprising that began as street protests has morphed into a civil war.
So far, video published by activists said to be from the small village has shown blood drenched and burned corpses of young men, who could have been rebel fighters.
Makdissi also responded to reports of the desertion of General Manaf Tlas, a member of the Assad inner circle, saying he "left without permission". It was the first government acknowledgment of his disappearance, but Makdissi did not comment on reports that Tlas defected to the opposition.
The desertion of Tlas, a cadet college classmate and personal friend of Assad, was one of the first signs earlier this month of cracks appearing in a governing elite that had previously looked unshakeable.
While the United States and its European and Arab allies are wary of rebel forces in Syria, which have proved fractious, they hope an erosion of support for Assad within the elite may in time allow for a political transition without him.
Special envoy Annan, who is leading efforts to implement a peace initiative in Syria, said on Friday that Syria had violated its commitments to U.N.-backed peace efforts.
"I am shocked and appalled by news coming out of the village of Tremseh, near Hama, of intense fighting, significant casualties, and the confirmed use of heavy weaponry such as artillery, tanks and helicopters," he said in a statement.
"This is in violation of the government's undertaking to cease the use of heavy weapons in population centres and its commitment to the six-point plan."
Makdissi rejected Annan's accusations, which were repeated in a letter sent to Foreign Minister Walid al-Moualem
"The least that can be said about this letter about what happened in Tremseh is that it did not rely on facts. As diplomatically as possible, we say that this letter was very rushed," the spokesman said.
Makdissi said statements on Saturday from a group of United Nations observers sent to Tremseh confirmed Syria's version of events. The group said the violence appeared to be attacks targeting rebels and opposition activists.
But their report also said artillery and mortars were used, and the head of the monitoring mission said a day earlier that monitors in the province had reported use of helicopters and indiscriminate fire.
Makdissi said accusations of a fierce attack were implausible given the tiny size of the village.
"Everything that has been said on the use of heavy weapons in an assault on a village no bigger than 1 km squared is completely untrue," he said, denying that villagers were targeted. "We are in a state of self-defence, not a state of attack."