Over 100 houses were completely destroyed and over 600 people fled in the aftermath of the fire and the collapse of the dump in Meetotamulla area in Kolonnawa, near here, police said.
16 people, including four children, were killed in the incident that happened yesterday, officials said.
Over 400 troops were deployed to rescue the slum dwellers adjacent to the 300-foot garbage dump.
The mountain of garbage caught fire and collapsed on dozens of homes as the residents were celebrating the traditional New Year.
The army and an air force helicopter were also deployed to douse the flames, they said.
Police said the true scale of the damage remained unclear.
"A search for survivors is under way," the police said in a statement.
Sri Lanka's Parliament was recently warned that 23 million tonnes of garbage at Kolonnawa dump was a serious health hazard. About 800 tonnes of garbage is being added to the dump on a daily basis.
The residents have been carrying out protests to move the dump elsewhere.
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