The special measures, enacted by the government Tuesday, will see soldiers deployed across the island for an initial 10-day period in a bid to prevent the unrest from spreading.
Violence has so far centered in and around the city of Kandy, located in the island's Central Province, where the death of a Sinhalese Buddhist youth on March 4, allegedly at the hands of a group of Muslim men, has sparked riots and arson attacks on Muslim businesses and mosques.
Sinhalese Buddhists make up about 75% of the population in Kandy.
A local Muslim politician, who did not want to be named through fear of reprisals, told CNN Wednesday that four mosques, 37 houses, 46 shops and 35 vehicles were destroyed in the initial outbreak of violence, though he cautioned the true number could be higher, with sporadic incidents continuing to flare-up.
Images shared on social media show widespread damage to Muslim areas of the city and nearby villages, with stores and businesses destroyed and buildings vandalized.
On Tuesday morning, the body of a 28-year-old Muslim man was pulled from the burned-out wreckage of a house set on fire the previous day by Sinhalese Buddhists in Aluthwatte, some 35 kilometers (21.7 miles) north west of Kandy.
"We want to make sure the communal violence doesn't spread all over Sri Lanka. We have to think about all the communities in the country. That is why the government imposed the state of emergency in the country to control the situation," Dayasiri Jayasekara, a government spokesperson, told CNN.
As of Wednesday, all schools have been suspended in Kandy and a strict curfew remains in place within the most volatile areas of the city, according to police.
Internet and phone access has also been restricted, with Kandy District mobile phone operators being instructed to block data transmissions to prevent the spread of photos.
The Sri Lankan Prime Minister, Ranil Wickremesinghe, condemned
the "racist and violent acts" in Kandy and promised to "take further action."
The city, the country's second largest with a population of around 125,000, is an important religious center for Buddhists, and is home to numerous monasteries and temple complexes.
The violence in Kandy is understood to have been triggered by an isolated incident on March 4, when a taxi carrying four Muslim men collided with a van driven by a young Buddhist man, according to local police.
The Buddhist man was assaulted with an iron bar and succumbed to his injuries in hospital, police confirmed.
The four Muslim men have since been arrested and remain in police custody.