The Indian ocean tsunami on 26 December 2004 was the biggest natural disaster in the history of Sri Lanka. Unlike many other countries affected by this tsunami, the damage in Sri Lanka was so widespread that about two thirds of the coastline from the northern Jaffna peninsula, along the eastern coast down to the southern tip of Dondra Head, as well as the relatively sheltered southwestern and western coasts, were subjected to inundation. More than 35,000 people died, 100,000 houses were damaged and 500,000 people were displaced, while the severe damage caused to infrastructure and environment exceeded US $900 million. It has been estimated that 3 to 5 years will be needed to complete the rehabilitation and reconstruction task at a cost of nearly US $2.2 billion. The recovery program has made some significant progress in certain areas and actions have also been initiated to improve the disaster mitigation capability in the country. This paper reviews the issues, problems associated with and progress of the recovery process as well as the work carried out to mitigate potential future disasters in Sri Lanka.