Officials said a generator in the Victoria hydro power complex which was running below its rated 71 MegaWatt capacity had tripped at 10.34 am setting off a chain reaction.
At the time the grid was running at a load of around 600MegaWatts which is about half the usual daytime load in a working day.
Though a small generator tripping out of the grid would not normally have caused a total grid failure, the low load in the New Year holiday may have helped destabilize the system, officials said.
The power grid last experienced a major failure on January 21, when a current transformer exploded.
Sri Lanka has experienced island-wide blackouts three times last year.
The grid failed in the early hours of December 07 after a thermal generator tripped.
Power failed island-wide on May 10, 2007 and also on April 15. Updated