The measure comes after police this morning re-imposed a curfew in parts of Kandy city after after clashes triggered by racial violence erupted between two groups.
Minister of National Dialogue Mano Ganeshan told China's Xinhua news agency that the decision had been taken following a special cabinet meeting held on Tuesday morning.
Ganeshan said the state of Emergency would give Sirisena the power to deploy the armed forces across the country.
According to news agency PTI, the BCCI has confirmed that the "situation is perfectly normal in Colombo" where the tournament is taking place, hours before India were to take on the hosts in the opening fixture of Nidahas Trophy at Premadasa Stadium.
"There have been reports of curfew and an emergency being called in Sri Lanka. The situation in picture is in Kandy and not Colombo. This is to notify everyone that after talking to concerned security personnel (Ministerial security division - in charge of team security), we have understood that the situation is completely normal in Colombo. If at all there is any update on the same we shall notify," Indian team's media cell issued an official press note from Colombo.
The clashes between two communities first broke in Kandy's Digana area on Sunday night after a 41-year-old man succumbed to injuries at a hospital after being attacked by a group of people over an incident involving two vehicles on February 22.
The radical Sinhala ultra-nationalist Bodu Bala Sena (BBS), Gnanasara Thero, visited the house of the victim to pay his last respects along with a few other monks.
A police official reportedly said 24 people had been arrested over the killing so far. Out of the 24, ten were directly involved in the killing.
The protests continued on Monday night.
Muslims constitute 10 percent of the island nation's population.
Pictures from the attack site on Monday
