More than 60 per cent of Sri Lanka’s labour force is employed in the informal sector, which comprises various economic activities in agriculture, fishing, livestock rearing, micro and small-scale enterprises, petty trade, and other small commercial activities. The informal sector is characterised by low social security and changing incomes. Given this, it is interesting to determine why such a large proportion of the labour force chooses to participate in the informal sector. This paper attempts to answer this question by using household survey data from two time periods. The paper lays special focus on assessing how access to services and infrastructure affects participation in the informal sector. The results show that a multitude of factors relating to individual preferences, location characteristics, and labour market conditions affect the occupational choice of individuals. Moreover, participation in the informal sector is due to a mix of market considerations and skill mismatches, moderated by household and societal factors. The paper argues for improving economic development in a more equitable manner across geographical regions, on the one hand, and improving the quality and relevance of educational opportunities, on the other.