The candles have been specially handcrafted from the paraffin wax produced at the world's oldest operating refinery in Digboi in Assam, the External Affairs Ministry said in a statement.
The first consignment of candles will be handed over by the Indian High Commission in Colombo to the Temple of the Sacred Tooth Relic here that houses the relic of the tooth of Lord Buddha, it said.
"On the auspicious occasion of Vesak, the thrice blessed day, Government of India announced the gifting of 16,000 candles as a special gift from the people of India to people of Sri Lanka," the statement said.
India and Sri Lanka share civilisational links. Buddhism forms an important part of the shared heritage of India and Sri Lanka.
Earleir, Modi, who is here on a two-day trip, went around the Sri Dalada Maligawa temple, an architectural wonder housing shared religious heritage.
The Sri Dalada Maligawa temple or the Temple of the Sacred Tooth Relic is located in the royal palace complex of the former Kingdom of Kandy, which houses the relic of the tooth of the Buddha.
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