Under the new textiles agreement, items covered by the Multi Fibre Arrangement (MFA) are gradually being brought under GATT rules with a final deadline of 2005. In Sri Lanka, the textiles and clothing sector remains the dominant growth industry, accounting for more than a half of total exports. The study seeks to present an overview of the status of the textiles and clothing industry in Sri Lanka, and assess the implications of the phasing out of the MFA of the domestic garment export industry.