Bank accounts belonging to the Tamil Rehabilitation Organisation, amounting to about $2 million, were frozen on Sunday, the group and the government said on their Web sites.
The government said: "Sri Lanka took this measure as the TRO had been found facilitating the military activities of the [Tamil] Tiger terrorists".
The group did not deny the allegations, but accused the government of waging "a concerted, malicious campaign" against it, including abduction of staff and attacks on its offices. The government denies that allegation.
TRO directors were currently seeking clarification from the Central Bank, a statement on the group's website said.
"TRO as always will assist and fully support any inquiry or investigation into any aspects of its operation," it said.
TRO mainly works with war- and tsunami-affected people in the north and east, where the government is locked in fierce fighting with ethnic Tamil rebels.
The group said the Central Bank move would severely hamper its ability to help the hundreds of thousands of people who have been made homeless by more than two decades of civil war and the Indian Ocean tsunami.