This is one of the first analytical reports on the major lessons learned from Sri Lanka’s experience of the tsunami and the response in the rebuilding phase. Promised external assistance appeared, at first, to be more than adequate to cover reconstruction costs in full. But problems soon emerged with relief payments, providing credit facilities, distribution of funds, coordination of reconstruction activities, and mismanagement of funds. Progress has been slow, uneven, and concentrated in certain areas, while missing other regions. Poor coordination among domestic and external agencies has emerged as a serious problem, together with the sensitive issue of balancing political considerations and humanitarian assistance to the needy. Some international NGOs’ reluctance to cooperate with government institutions and competitive behaviour towards other agencies have hampered coordination and implementation. The modalities of aid spending, including procedures and mechanisms need to be reviewed to improve quick and effective responses. Problems with aid utilization and accountability must be urgently addressed. Practical policy recommendations made in this report include: livelihood-related cash payments to households; assistance for rebuilding houses; titles to new houses; buffer zone rules; early warning and disaster management systems; coordination of donor-assisted activities and macro-economic policy issues.