Police said there were no major incidents overnight around Kandy, a popular tourist destination 115 kilometres east of the capital Colombo.
A daytime curfew within Kandy city's limits was relaxed Thursday morning in a sign of improving conditions, only to be re-imposed in the afternoon as communal violence claimed a third life within a week.
According to media reports, around 80 tourists have cancelled their bookings made at one of the top three travel companies in Sri Lanka, which could possibly amount to a loss of 800 nights.
The riots, which began on Monday after a man from the Sinhalese majority died from injuries sustained in an attack by Muslims a week earlier, have left almost 200 Muslim businesses and homes destroyed.
"So far, there have been 85 arrests in connection with a series of incidents of communal violence", he said.
Police said Sinhalese extremists were using social media sites and messaging applications to spread hate speech and instigate attacks on the Muslim minority.
Under attack for alleged police inaction, President Sirisena also replaced Prime Minister Ranil Wickremesinghe as the law and order minister.
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"The government must show that it will bring to account those who have incited communal violence, particularly notorious figures who have been emboldened by the pervading impunity to preach hatred openly and publicly".
Police officials said that tight security would remain in place throughout the district to ensure that there was no relapse into violence amid concerns among Muslims about possibility of attacks during Friday prayers.
Troops guarded every junction while security personnel carried out patrols on motorcycles and in armoured personnel carriers.
According to Amnesty International, on March 5, a mob set homes, shops and a mosque belonging to the local Muslim community ablaze in the Digana area of Kandy.
In 2014, violence directed against Muslim minority groups broke out in the southwestern town of Aluthgama, following a rally by hardline Buddhist nationalist monks, resulting in the death of at least three Muslims.
There have been several communal clashes in recent years in Sri Lanka, where Sinhalese Buddhists make up 75 per cent of its 21 million people.
"We are concerned by the acts of violence recently perpetrated in various regions of Sri Lanka and targeting the Muslim population and their buildings", the ministry said.