Sri Lanka is one of the most Buddhist countries of the world. Objective of the paper is to discuss the sources of Sinhalese Buddhist nationalism and to link changes within religion to social and political development of modern postcolonial society. The paper deals with three topics: (1) link between Sinhalese nationalism and Buddhism, leading to creation of the Protestant Buddhism; (2) relation between monastic Buddhism and popular (spiritual) religion; and (3) political influences, leading to emergence of the right-wing political Buddhism, which opposed the peace solutions of the civil war, and which continues in xenophobic sentiments towards minorities even after the end of the war.