Pumped hydro storage (PHS) is a well-established technology for storing energy in large quantities and over long periods. Sri Lanka, a country rich in hydropower resources, has significant potential for PHS development. The central highlands, where the country’s major hydropower plants are located, offer many suitable sites for PHS development thanks to their favorable topography, high rainfall, and large reservoirs. PHS can provide a reliable energy source, reduce the country’s dependence on fossil fuels, and mitigate the negative environmental impacts of conventional energy sources. Despite its potential, PHS development in Sri Lanka faces several challenges, including high capital costs, land acquisition issues, and environmental concerns. This paper reviews the current status of Sri Lanka’s power sector, assesses PHS potential in Sri Lanka, and examines the benefits of PHS development for Sri Lanka.