This study aims to explain the employment progress achieved in Sri Lanka from 1990 to 2010. This period has seen a drastic reduction in unemployment, and improved working conditions, particularly for women, accompanied by structural transformation away from agriculture towards manufacturing and services. The drivers of employment progress in quality, quantity and access are examined in terms of policies affecting demand for and supply of labour. While this employment progress has been achieved under unique and challenging conditions, not least a civil war from 1983 to 2009, the study attempts to draw conclusions for policy-makers in other contexts. In particular it points to the long-term adherence to a hybrid industrial policy agenda comprising outward market orientation and policies to promote investment into export processing zones, attention to education and vocational training, and continuing strong government economic activity in the form of state-owned enterprises and public employment. As for any progress story, employment progress is not necessarily ‘success’ – outward migration and war-related employment have also been key factors. Nonetheless, Sri Lanka is on a trajectory of economic transformation that, with the end of the civil war, offers a strong basis for further employment progress and improved livelihoods.