A powerful onslaught by the captain Arjuna Ranatunga who scored his fourth one-day century left New Zealand chasing an improbable total of 294 for victory.
New Zealand 's task was further compounded by their poor net run rate in the tournament, which left them with the tough task of not only beating Sri Lanka, but to score the runs in a minimum of 41.4 overs to qualify for the final.
Thus, technically New Zealand began their innings needing to score 294 for victory off 250 balls. On the face of it, it was an impossible asking rate to maintain and it was no surprise that the Kiwis folded up tamely for 206 runs off 39.1 overs.
New Zealand captain Stephen Fleming played it safe by asking Sri Lanka to bat first on a pitch used for Friday's game against India. However, things did not go right for them, as Sanath Jayasuriya and Romesh Kaluwitharana gave Sri Lanka a stand of 69 off 12.2 overs to put them on course for a huge total.
Kaluwitharana made 54 off 64 balls with eight fours, but the best batting of the innings came from the experienced pair of Aravinda de Silva and Ranatunga who put on 132 for the third wicket in 23.1 overs. New Zealand were made to pay dearly for letting both of them off during their innings. De Silva was let off at 13 when he top edged a sweep off Chris Harris and Chris Cairns put down the catch at backward square-leg.
Ranatunga was dropped at 83 by Craig Spearman at mid wicket off Harris and at 87 by Fleming in the same position of Nathan Astle.
De Silva went onto score his third fifty of the tournament and when he was out top edging a sweep of Harris for 62, he had carried his one-day international run-aggregate to 7,500 making him only the third highest one-day run-getter of all-time after Desmond Haynes of West Indies (8648 runs from 238 matches) and Mohammad Azharuddin of India (8280 runs from 290 matches).
Ranatunga went to his fourth one-day century in 240 matches off 95 balls hitting two sixes and six fours before fatigue got the better of him in the 49th over. He easily took the 'Man of the Match' award.
Sri Lanka's total of 293 for four fell four short of the record score on this ground of 296 for 4 off 46 overs against Bangladesh in an Asia Cup match in 1997.
New Zealand began their innings disastrously losing Bryan Young for three in the third over. The veteran opener square drove a full toss from Suresh Perera straight into Roshan Mahanama's hands at cover point to provide the fielder with his one hundredth catch in one-day internationals. Not many have had the honour of taking a century of catches in the abbreviated game, and Mahanama was only the fourth after Azharuddin (140 catches from 290 matches), Allan Border (127 from 273) and Viv Richards (101 from 187).
New Zealand continued to lose wickets at regular intervals as they attempted to maintain a very high asking rate which kept on climbing as the wickets started to tumble. Astle made a top score of 74 off 76 balls with three sixes and six fours, but none of the other batsmen could make any major contributions which was so vital if they were to successfully reach the required target.
Sri Lanka's spinners put the brakes on the New Zealand batting by grabbing nine wickets. Yesterday's win put Sri Lanka on top of the qualifying round standings with eight points, followed by India with six and New Zealand with four. New Zealand failed to win any of their six matches.