At 1:30pm local time (19:00 GMT), with most results in, the Sri Lanka Podujana Peramuna (SLPP) had won 44.05 percent of the vote.
Prime Minister Ranil Wickremesinghe's United National Party (UNP) garnered 31.65 percent while the President Maithripala Sirisena's Sri Lanka Freedom Party (SLFP) came a distant third with 9.52 percent of the vote.
This is the first local elections since the centre-left SLFP and centre-right UNP parties formed a unity government in August 2015.
The UNP however, is expected to win the Colombo Municipal Council comfortably, with Rosy Senanayake set to become the first female mayor of Sri Lanka's capital city.
Saturday's result has surprised many Sri Lankan political analysts and is being considered a blow to the ruling coalition that has been roiled by political bickering in recent months.
President Sirisena was particularly critical of the UNP in their handling of the economy. Many UNP ministers publicly criticised the president.
The coalition infighting was clearly evident during the campaign trail, as both the coalition partners contested against each other.
Following a meeting with the UNP parliamentary group on Sunday afternoon, Prime Minister Wickremesinghe indicated that his party will continue with the ruling coalition until 2020.
The SLPP, formed by breakaway members of Sirisena's party, attacked the unity coalition for what it called "broken promises" and corruption.
The election was contested for the first time using a complex system that mixed both the first-past-the-post and proportional representation systems.
Vidura Wickramanayaka, a member of parliament now aligned with the SLPP, told Al Jazeera that even though this was a local election, "this is tantamount to a national election, if you look at the political platforms, the issues that were discussed were national issues".
If parliamentary elections were held in the near future "this trend will continue", Wickramanayaka said referring to the potential that the SLPP could return the largest number of MPs.
Sirisena was an unexpected presidential contestant when he was chosen as the common candidate to contest the presidential elections against the then incumbent Rajapaksa.
He eventually went on to win 2015 presidential elections on an anti-corruption platform and promising to bring in constitutional reform and "Yahapalanaya" or good governance.
"The mandate received by the government in 2015, was for governance - reforms, swift action regarding accusation of corruption levelled at Rajapaksa, less radicalism regarding constitutional reforms and continuation of the developmental policies of the Rajapaksa regime," Kalana Senaratne, a political analyst, told Al Jazeera.
"However, there have been no visible action against the corrupt."
The 19th amendment to the Constitution bars Rajapaksa from another presidential bid. Many observers expect his brother, the once powerful Defence Secretary Gotabaya Rajapaksa, to launch a presidential bid.
With just two years before the next parliamentary elections, and Rajapaksa in the ascendancy, many political observers expect trouble to grow within the ruling coalition.