The loan, spread until 2015, would be utilised to develop a range of projects including construction of administrative complexes, renewable energy plants and infrastructure development.
The projects will be facilitated by the Korean Embassy and the Export and Import bank of Korea.
A Framework Arrangement for the disbursement which was signed on Monday was based on an MoU signed between the two countries during the state visit of Sri Lankan President Mahinda Rajapaksa to South Korea in April.
The facility under the Economic Development Cooperation Fund (EDCF) is aimed at promoting economic cooperation between Korea and developing countries.
At present Sri Lanka is the fourth largest recipient of EDCF with disbursements in the areas of water supply, irrigation, energy, transport and establishing social safety networks.
These projects have been carefully selected through in-depth assessment and multiple discussions to draw out Sri Lanka's developmental challenges and to reflect the country's development needs.
The Government of Korea had also provided approximately USD 70 million to Sri Lanka in the form of grants to achieve balanced and sustainable development and to assist social integration in line with its national development programme.
