Ceylon National Congress (CNC) was founded to agitate for greater autonomy. The party soon split along ethnic and caste lines. Prof. K. M. de Silva, the famous Peradeniya historian has pointed out that the refusal of the Ceylon Tamils to accept minority status to be one of the main causes which broke up the Ceylon National congress. The CNC did not seek independence or "Swaraj". What may be called the independence movement broke into two streams, viz., the "constitutionalists", who sought independence by gradual modification of the status of Ceylon, and the more radical groups associated with the Colombo Youth League, Labour movement of Goonasinghe, and the Jaffna Youth Congress. These organizations were the first to raise the cry of Swaraj, or outright independence, following the Indian example, when Nehru, Sarojini Naidu and other Indian leaders visited Ceylon in 1926. The efforts of the constitutionalists led to the arrival of the Donoughmore Commission reforms (1931) and the Soulbury Commission recommendations, which essentially upheld the 1944 draft constitution of the Board of ministers headed by D. S. Senanayake. The Marxist Lanka Sama Samaja Party (LSSP), which grew out of the Youth Leagues in 1935, made the demand for outright independence a corner stone of their policy[7] Its deputies in the State Council, N.M. Perera and Philip Gunawardena, were aided in this struggle by other less radical members like Natesa Iyer and Don Alwin Rajapaksa. They also demanded the replacement of English as the official language by Sinhala and Tamil. The Marxist groups were a tiny minority and yet their movement was viewed with grave suspicion by the British administration. The heroic (but ineffctive) attempts to rouse the public against the British Raj in revolt would have led to certain bloodshed and a delay in independence. British state papers released in the 1950s show that the Marxist movement had a very negative impact on the policy makers at the Colonial office.

The Soulbury Commission was the most important result of the agitation for constitutional reform in the 1930s. The Tamil leadership had by then fallen into the hands of G. G. Ponnambalam who had rejected the "Ceylonese identity".Ponnamblam had declared himself a "proud Dravidian", and attempted to establish an independent identity for the Tamils. Ponnamblam was a politician who attacked the Sinhalese, and their historical chronicle known as the Mahavamsa. One such inflamed attack in Navalapitiya led to the first Sinhala-Tamil riot in 1939.Ponnambalam opposed universal franchise, supported the caste system, and claimed that the protection of Tamil rights requires the Tamils (15% of the population in 1931) having an equal number of seats in parliament to that of the Sinhalese (~72% of the population). This "50-50" or "balanced representation" policy became the hall mark of Tamil politics of the time. Ponnambalam also accused the British of having established colonization in "traditional Tamil areas", and having favoured the Buddhists by the buddhist temporalities act. The Soulbury Commission rejected these submissions by Ponnambalam, and even noted their unacceptable communal character. Sinhalese writers pointed out the large immigration of Tamils to the southern urban centers, especially after the opening of the Jaffna-Colombo railway. Meanwhile, Senanayake, Baron Jayatilleke, Oliver Gunatilleke and others lobbied the Soulbury Commission without confronting them officially. The unoffcial submissions contained what was to later become the draft constitution of 1944.

The close collaboration of the D. S. Senanayake government with the war-time British administration led to the support of Lord Mount-Batton. His dispatches and a telegram to the Colonial office supporting Independence for Ceylon have been cited by historians as having helped the Senanayake government to secure the independence of Sri Lanka. The shrewd cooperation with the British as well as diverting the needs of the war market to Ceylonese markets as a supply point, managed by Oliver Goonatilleke, also led to a very favourable fiscal situation for the newly independent government.