The Sri Lankan government has ordered a mosque be relocated after Buddhist monks threatened to demolish it because they said the 50-year-old structure had been built illegally in an area sacred to Buddhists.

The order came on Sunday, two days after an estimated 2,000 monks in the island nation's central town of Dambulla protested against the mosque, forcing it to abandon Friday prayers, and threatened violence if it was not removed.

The monks have also asked that a Hindu temple in the area be removed.

"Following a discussion with the relevant parties, the prime minister has ordered the disputed mosque moved to a suitable location as soon as possible," Sisira Wijesinghe, media secretary to Prime Minister DM Jayaratne, told the Reuters news agency on Sunday.

He said several Muslim ministers took part in the discussion, a claim rejected by Muslim political leaders.

"It is a false statement and there was no discussion on this and we don't agree with the mosque relocation," AHM Fowzie, a senior Muslim cabinet minister, told Reuters.

Buddhist majority

The mosque has reportedly existed since 1962 and regular prayers have been conducted there for the past three decades.

Buddhist monks said the government mistakenly had allowed the mosque to be expanded recently, despite a 1982 state regulation declaring the area sacred for Buddhism.

The chief of the mosque said, however, that the construction was legal and the building was simply being refurbished.

Buddhism is the main religion in Sri Lanka, ahead of Hinduism, Islam, and Christianity. Buddhists make up around 70 per cent of the population.