In this paper, we empirically examine the relationship between tariff liberalization and informal labour market for the case of Sri Lanka during 1996-2007. We found that, during the study period, the share of informal labour employment in the economy has moderately increased and this increase is quite significant in the manufacturing sector. After controlling for individual characteristics and industry-level variables, we found some evidence that the level of trade protection is negatively associated with the share of informal employment. We correct our samples for selection bias issues and address the possible endogeneity issue involving political economy consideration of trade policy reforms.