This paper examines the existing corporate governance environment, practices, and institutional framework in Sri Lanka and evaluates their effectiveness to identify current issues and challenges. Sri Lanka is an emerging and rapidly growing market economy in South Asia with a liberalised economic and trade policies associated with FDI, international trade, and export-led development policies. Sri Lanka's corporate governance (CG) systems and practices have been largely influenced by both colonial economic policies and post-independence govt policies. Its CG practices consists of promoting dispersed ownerships, increasing size of a board and decreasing directorship per director, greater involvement of internationally recognized few audit firms in accounting and auditing functions, professional orientations of company secretariat services. The provisions of Companies Act, the role of Securities and Exchange Commission, professional accounting and auditing institutions, Central Bank of Sri Lanka and the country's regularity environment play a significant role in the implementation of CG systems in the country. With the rapid expansion of the corporate sector in recent years, there is need for improving the current regularity mechanism in the country. The paper addresses the issue of whether the current governance mechanisms in Sri Lanka are adequate to respond to the needs of the fast changing business environment in Sri Lanka and to face the challenges posed by the changing domestic and global corporate environment.