Sri Lanka’s economic development in the foreseeable future will remain heavily dependent upon the effective utilization of its limited resources, mainly land and water, for agriculture, power, other domestic uses and industry. Many past efforts, with their efforts on immediate gains and centralized, but inadequately co-ordinated control, have inadequately addressed the need to manage and utilize the natural recourses that are the basis for continued production more effectively and in a sustainable manner. Intensification of production, necessary to meet future population and development needs, brings with it possibilities for aggravating these problems. This paper briefly examined a conceptual framework and a development strategy built in to a novel approach to enhance the share of user control over land and water resources through state-user partnerships that contribute to intensified and sustainable agricultural production while protecting the physical, biological and social environments. Major constraints inhibiting efforts at intensifying the utilization of Sri Lanka’s natural resources base, particularly land and water, while securing profitability, sustainability and environmental conservation, were identified through a novel participatory project design process, participants comprised a cross section of stake holders of land and water use covering national, provincial, divisional and user levels. Through this participatory process, four specific objectives for Shared Control of Natural Resources (SCOR) have been identified: (a) To improve the incentive and institutional context in which land and water related activities are undertaken in pilot water sheds ( Huruluwewa and Nilwala) through appropriate modes of production and state user partnerships so as to ensure both productivity and sustainability of these resources; (b) To get resource user groups and managers to consider environmental implications of land and water use more explicitly and to internalize environmental considerations in decision making and implementation at all levels; (c) To enhance governmental , group and individuals ‘Information and understanding about potentials of and prospects for natural resources(land and water) base for production and protection; and (d) To strengthen the capacity of the Provisional/Divisional level government authorities in planning for land and water resources utilization in an integrated manner, gradually transforming the strategy of development of land and water resources from a “project” made to a “program mode” . The interventions are being launched to two water sheds and are focused on formulating pilot testing and applying innovative and profitable agricultural production modes utilizing soil and water conservation methods. Such activities are designed to strike a balance between production and protection. The economic analysis included only a few benefit areas such as: incremental benefits to new production modes, savings in government expenses on protection and on operation and maintenance of irrigation networks etc. the project was proves to be cost effective.