Wildlife Minister Gamini Jayawickrama Perera said the cabinet approved new regulations imposing tough conditions on owners of elephants, which are considered sacred by Buddhists in Sri Lanka.
The animals are also legally protected but are often subjected to cruel treatment by some owners.
Under the new regulations seen by AFP, owners are banned from using working elephants below the age of 10 years while those under five years cannot be used in parades, even at religious festivals.
There are 41 new conditions aimed at ensuring minimum standards of care, including the daily diet that should include fresh fruit in addition to leaves and vegetables.
Owners must also take their elephants for daily walks of not less than five kilometres (three miles) and the animals must be allowed two and a half hours for bathing.
The minister is also seeking to regulate the use of elephants in movie productions.
Elephants cannot be made to fight each other on camera. Flash or floodlights cannot be shone on the animals and letting off firecrackers near them is also banned.
Those violating the new regulations could lose their ownership licence and face up to three years in jail.
The new laws come into force as the authorities investigate allegations that over 40 baby elephants had been stolen from national wildlife parks over the last decade and are being kept as pets.
Asian elephant expert Jayantha Jayewardene said the new rules were welcome.
"The regulations are a step in the right direction, but it will be difficult to enforce things like the quality and the quantity of food that should be given to each animal," Jayawardene told AFP.
Many rich Sri Lankans keep elephants as pets to show off their wealth, but there have been numerous complaints of ill treatment and cruelty.
Capturing wild elephants is illegal. Official records show there are about 200 domesticated elephants in a country where the population in the wild is estimated at about 7,500.