A fishing trawler was detected with the passengers, including 11 women and 13 children, off the island's north-eastern coast of Mullaittivu, navy spokesman Kosala Warnakulasuriya said.
"The trawler was intercepted by navy patrol craft 20 nautical miles east of Mullaittivu," Warnakulasuriya said, adding that the 54 people onboard were handed over to police for further investigations.
He said the suspects told them that they were trying to leave for Australia, despite Canberra announcing last year that they will no longer allow even genuine asylum seekers the right to settle in Australia, moving them to Papua New Guinea instead.
In February, Sri Lanka's police arrested 75 people who were trying to illegally travel by boat to New Zealand.
The last detection of significant boat traffic to Australia was in October, when 70 Sri Lankans were arrested by the navy off the island's southern coast of Galle, the navy said.
Sri Lankan asylum-seekers, many of whom claim persecution at home ov