Minister of City Planning Rauff Hakeem said: "The cabinet of ministers decided on tough measures, including a 10-day nationwide state of emergency".
Ruwan Gunasekera, a police spokesman, told Anadolu Agency that a personal dispute was the initial trigger and police curfew was declared to bring the situation under immediate control.
Police said a magisterial inquiry into the death was presently underway while a team from the Criminal Investigations Department had also been dispatched to Kandy to conduct a probe into the clashes. The government said some people were trying to instigate communal violence via social media and warned stern action against them.
The government called on the local population "to act with responsibility and remain calm". This was the second serious incident of violence against a Muslim community in the country over the past week, following a similar attack in the eastern coastal district of Ampara on 26 February.
Emergency in Sri Lanka: The government sent troops to the Kandy district and imposed curfew.
Prime Minister Ranil Wickremesinghe also ordered an investigation into alleged police inaction in handling the clash.
As per reports, an emergency was required after the religious and ethnic violence has increased in Sri Lanka.
A police official said 24 people had been arrested over the killing so far. At least one mosque was damaged overnight. Another 13% of the population are Hindus.
Rajith Keerthi Tennakoon, executive director of the Centre for Human Rights Sri Lanka, condemned the "unfathomable police inefficiency" that he said led to the violence.
Mobs set fire to Muslim owned businesses and attacked a mosque in the east of the country last week after a Muslim chef was accused of adding contraceptives to food sold to Sinhalese.