"An indefinite curfew will be in force at Aluthgama," police said.
A police spokesman appealed to the people to remain calm and not to disrupt the peace in the country.
The curfew was imposed following tensions which prevailed in the area after a Buddhist majority nationalist group staged a march in a Muslim-dominated area which they claimed had been stoned.
Many activists from both sides as well as bystanders were injured during the evening clashes.
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"The curfew was declared to bring the situation under control," a police officer in the area told reporters.
The roots of the incident go back to last Thursday when a Buddhist monk alleged he had been beaten up in the nearby Beruwala town after a traffic incident.
Muslims make up about 10 per cent of Sri Lanka's 20 million population.