The southern and western provincial councils, the highest level of local government, have been dissolved, clearing the way for local elections almost a year before they were due, officials said.
"The election dates will be announced by the elections commissioner, but they are likely to be towards the end of March," an official of Rajapakse's office said, asking not to be named.
"This will be a crucial test for the president," the official added.
But Rajapakse, who has maintained an iron grip on power since 2009, is hoping for a landslide victory, giving him enough momentum to call national elections, according to experts and local media.
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Domestic media have speculated that Rajapakse, who is in the fourth year of a six-year term, may call a snap presidential poll later in 2014 if voter support is still high and to capitalise on a splintered opposition.
International criticism over alleged war crimes has boosted Rajapakse's image at home, where many Sinhalese consider him a patriot for ending the conflict that killed over 100,000 people.
Rajapakse faces little political opposition at home as his main rival, the United National Party, remains locked in a crippling internal power struggle.
In 2010, Rajapakse amended the constitution, removing the two-term limit on a president and clearing the way for him to run for office for any number of terms.