Since ancient times Sri Lanka was ruled by monarchs, most notably of the Sinha royal dynasty that lasted over 2000 years. The island was also infrequently invaded by South Indian kingdoms and parts of the island were ruled intermittently by the Chola dynasty, the Pandya dynasty, the Chera dynasty and the Pallava dynasty. The island was also invaded by the kingdoms of Kalinga (modern Orissa) and those from the Malay Peninsula. Buddhism arrived from India in the 3rd century BCE, brought by Bhikkhu Mahinda, who is believed to have been the son of Mauryan emperor Ashoka. Mahinda's mission won over the Sinhalese monarch Devanampiyatissa of Mihintale, who embraced the faith and propagated it throughout the Sinhalese population. The Buddhist kingdoms of Sri Lanka would maintain a large number of Buddhist schools and monasteries, and support the propagation of Buddhism into Southeast Asia.

Sri Lanka had always been an important port and trading post in the ancient world, and was increasingly frequented by merchant ships from the Middle East, Persia, Burma, Thailand, Malaysia, Indonesia and other parts of Southeast Asia. The islands were known to the first European explorers of South Asia and settled by many groups of Arab and Malay merchants.

A Portuguese colonial mission arrived on the island in 1505 headed by Lourenço de Almeida, the son of Francisco de Almeida. At that point the island consisted of three kingdoms, namely Kandy in the central hills, Kotte at the Western coast, and Yarlpanam (Anglicised Jaffna) in the north. The Dutch arrived in the 17th century. Although much of the island came under the domain of European powers, the interior, hilly region of the island remained independent, with its capital in Kandy.

The British East India Company established control of the island in 1796, declaring it a crown colony in 1802, although the island would not be officially connected with British India. The fall of the kingdom of Kandy in 1815 unified the island under British rule.

European colonists established a series of tea, cinnamon, rubber, sugar, coffee and indigo plantations. The British also brought a large number of indentured workers from Tamil Nadu to work in the plantation economy. The city of Colombo was established as the administrative centre, and the British established modern schools, colleges, roads and churches that brought Western-style education and culture to the native people.

Increasing grievances over the denial of civil rights, mistreatment and abuse of natives by colonial authorities gave rise to a struggle for independence in the 1930s, when the Youth Leagues opposed the "Ministers' Memorandum," which asked the colonial authority to increase the powers of the board of ministers without granting popular representation or civil freedoms. Buddhist scholars and the Teetotalist Movement also played a vital role in this time.

During World War II, the island served as an important Allied military base. A large segment of the British and American fleet were deployed on the island, as were tens of thousands of soldiers committed to the war against Japan in Southeast Asia. It was expected that Sri Lanka would gain independence as part of India, as the Indian National Army created a 'Lanka Regiment' from the existent Sri Lankan diaspora. Indeed, A plan was made to transport them to Sri Lanka by submarine, to lead a liberation struggle there, but this was aborted.

Following the war, popular pressure for independence intensified. The office of Prime Minister of Ceylon was created in advance of independence on 14 October 1947, Don Stephen Senanayake being the first prime minister. On 4 February 1948 the country won its independence as the Dominion of Ceylon. The island enjoyed good relations with the United Kingdom and had the British Royal Navy stationed at Trincomalee.

On 21 July 1960 Sirimavo Bandaranaike took office as prime minister, and became the world's first female prime minister and the first female head of government in post-colonial Asia. In 1972, during Sirimavo Bandaranaike's second term as prime minister, the country became a republic within the Commonwealth, and the name was changed to Sri Lanka.