The current peace process between the Sri Lankan government and the Liberation Tigers of Tamil Eelam (LTTE) is unprecedented on several counts: talks have never lasted this long, been this stable, or been at such a high level in the past. Also unprecedented, and perhaps key to the early success of the process, has been an agreement (referred to in this article as the ‘Killinochchi consensus') between the main stakeholders that the first priority of conflict resolution is realising the ‘peace dividend'. This has resulted in considerable action and cooperation on reconstruction of the war-torn Northeast and development of the island's economy. It is suggested here that, apart from their direct benefits, these efforts have two further aims: to bolster popular support for the peace initiative, and to foster cooperation between the two negotiating sides ahead of discussions on more contentious issues. Also novel in the Sri Lankan case has been the willingness of international donors, particularly the international financial institutions, to get involved in the peace process well before a permanent solution has been achieved. While several questions remain about the nature and scope of the development imperative, whether it has been correctly sequenced, and whether it can deliver a sustainable peace, a constructive and pragmatic approach to peacebuilding through development holds some promise in Sri Lanka and perhaps elsewhere.