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Sri Lanka on Tuesday declared a nationwide state of emergency after riots targeting Muslims left at least two people dead and homes ablaze in a hill station popular with tourists.

The government said it was imposing the extraordinary measures after police failed to curb violence in Kandy, a central district famed for its tea plantations and Buddhist relics.

Heavily-armed police commandos were deployed to restore order in Kandy after rioters defied an overnight curfew and went on the rampage.

"The government is taking all possible measures to protect the people, especially Muslims," Prime Minister Ranil Wickremesinghe told parliament.

He said an inquiry had also been opened into security lapses by police that allowed mobs of Sinhalese rioters to burn mosques as well as homes and businesses belonging to Muslims.

The body of a 24-year-old Muslim man was pulled out of a burnt home on Tuesday. At least two people have been declared dead after the outbreak of violence.

Police said two dozen people have been arrested.

The emergency measures, imposed for the first time since 2011, give authorities sweeping powers to arrest and detain suspects for long periods, and deploy forces where needed.

President Maithripala Sirisena said the measures would "redress the unsatisfactory security situation prevailing in certain parts of the country".

"The police and armed forces have been suitably empowered to deal with criminal elements in the society and urgently restore normalcy," he said.

City planning minister Rauff Hakeem described the riots as a "monumental security lapse" and recommended disciplinary action against those responsible for allowing the situation to deteriorate.

Sri Lanka's parliament Tuesday issued an apology to its Muslim minority, which constitutes 10 per cent of the country's population of 21 million.

The violence in Kandy, a serene region of verdant hills frequented by tourists and pilgrims, has threatened to reignite communal tensions that have roiled Sri Lanka in recent weeks.

The emergency declaration was made after a special cabinet meeting with President Sirisena.

It is the first time in seven years Sri Lanka has resorted to such a measure.

The island nation was under a state of emergency for nearly three decades during the civil war, when thousands disappeared and civilians were subjected to rights abuses.

Amnesty International said it was important authorities took action to protect minorities from violence and hold those responsible to account.

"But a state of emergency must not become a pretext for further human rights abuses," said Amnesty's South Asia director Biraj Patnaik.

UN political chief Jeffrey Feltman will visit Sri Lanka this week, the UN spokesman said Tuesday, for a trip that was planned before the state of emergency was imposed.

Last November riots in the south of the island left one man dead and homes and vehicles damaged.

In June 2014, riots between Buddhists and Muslims left four dead and many injured.