The theoretical explanation of neorealist or structural realist perspective with relevance to Sri Lanka’s foreign policy is one of the research gaps that are highlighted in this research for niche market. The two level game theory has been used in describing Sri Lankan foreign policy, but the validation of these two theories to find the most appropriate still exists as a research gap in literature. To meet these theoretical requirements in foreign policy literature of Sri Lanka as a small state with special reference to its ethnic crisis, the secondary data is utilized and the enduring debate over the structural and domestic political explanation of inter- state relations has created the motivation for this paper. In discussion high weight is given to India and Sri Lanka relations. The structural realism provides comprehensive theoretical support in explaining Sri Lankan foreign policy and it is more reliable in describing the external influences infiltrate in to domestic sphere via ethnic crisis. The lineup of supportive factors indicate that structural realism has strong sway in Sri Lanka’s responding to the outside constraints, but it could not cover other aspects of domestic political role in the foreign policy making. To that end the two level game theory provide insights in to the explanation on why some decisions were made either at domestic level and the entanglement of the two levels. Despite certain limitations of the theories rather than using one theory and trying to analyze Sri Lanka’s responses to external compulsions it is more useful to make use of both theories in accordance with its applicability for the necessary explanation.