The World Bank has promised Sri Lanka grants and interest-free loans worth about $800m.
The money, which will be provided by the World Bank's International Development Association (IDA) is intended to assist the government in rebuilding the country.
It is significantly higher than previous IDA lending to Sri Lanka.
The World Bank's director for Sri Lanka, Peter Harrold, said that this was also an opportunity for the government to bring about rapid economic growth.
News of the World Bank deal boosted Sri Lanka's stock market on Wednesday.
The Colombo all-share index was up 4 points at 736.
"The market didn't really know about it today. It will definitely encourage investment," said Sanjeewa Maddumage, a broker at HNB Stockbrokers said.
The stock market in Sri Lanka is down almost 10% this year on fears a protracted war in Iraq could increase the cost of imported oil and hurt tea exports.
Nineteen years of civil war have severly disrupted the economy while development aid had almost dried up.
The World Bank said the funds would be spend on restoring health
services, water supplies and the resettlement of the hundreds of thousands of Sri Lankans displaced by the war.
The aid package is the biggest since Sri Lanka and the island's Tamil Tiger rebels signed a truce just over a
They have since began peace talks.