Sri Lanka intends to become completely demilitarised by 2018, the government said Wednesday, a significant announcement that will end the army's involvement in civilian life after decades of ethnic war.

Heavy deployments from the Sri Lankan army have remained in former war zones in the island's north and east since a 37-year conflict with Tamil separatists ended in May 2009.

The military is also deeply involved in private enterprise, running everything from beauty parlours to businesses selling vegetables and fish, in competition with small-scale vendors.

"By 2018, we hope to complete the demilitarisation process, not only in the north-east, but the rest of the country too," Foreign Minister Mangala Samaraweera told reporters in Colombo.

"We have also asked the military to disengage from all commercial activities they are engaged in," Samaraweera said.

The UN Human Rights Council has repeatedly asked Sri Lanka to reduce the military's involvement in civilian life and restore normality to the war-torn regions.

At least 100,000 people died in Sri Lanka's drawn-out separatist campaign, led by Tamil Tiger rebels who fought for an independent state within the majority Sinhalese island.

After the war ended, former president Mahinda Rajapakse deployed the army to operate luxury hotels, restaurants, farms and engage in retail.

The move forced many small-scale vendors out of business, while the Sri Lankan airforce ran a beauty parlour offering cheaper services that undercut private barbers.

Samaraweera said the military had already given up some of the businesses they were engaged in, adding that there would be a complete disengagement by 2018.

He added that the government has replaced former military top brass with civilian governors in two embattled provinces.

The government has begun a process of handing back some military-occupied land to its original owners.

It is also making efforts to trace thousands of people who went missing during and after the war and pay reparations to victims of the conflict.

Sri Lanka's government has been praised for agreeing to investigate allegations that up to 40,000 ethnic Tamils were killed by troops in the final months of fighting in 2009.

However, its slow progress on probing the deaths has also drawn criticism.