Under pressure from the Muslim community, Sri Lanka first broke off ties with Israel in 1970 and again in 1990 after a brief resumption of low level relations in the early 1980s.
The announcement of resumption of ties Thursday was preceded by long months of quiet contact between the countries, carried out on the Israeli side primarily by Israel's ambassador to India.
In the past, Israel established an agricultural farm in Sri Lanka and brought over Sri Lankans for training in Israel.
However, the most important aspect of the relationship between the countries is military, with Israel having supplied Sri Lanka with planes, ships and know-how.
Even when the countries did not have formal ties, there was still activity in this sphere with military delegations visiting Israel and purchasing arms.
A diplomat who served in the capital city of Colombo in the past said that Sri Lanka reached the point where it felt it would be absurd not to resume ties with Israel, especially as most of the Asian countries around it had already done so.
He added Sri Lanka, a small island with a population of 18 million off the coast of India, also knows that it will not more easily be able to purchase Israeli arms for use in its long-running ethnic war against the Liberation Tigers of Tamil Eelam rebels.
The LTTE has recently staged a series of stunning successes, pushing back government troops and threatening to recapture its former stronghold of the northern Jaffna peninsula.
Modalities of the diplomatic representatives will be discussed and decided upon by the two governments in the near future.