The funds will be provided through five civil society organisations: CARE, ACTED, Oxfam, Adventist Development and Relief Agency, and Stichting Solidaridad.
The money will benefit poor, rural communities in the Monaragala and Badulla districts in Uva Province, and in the Nuwara Eliya and Matale districts in Central Province.
The grant is part of the EU's wider programme of support to rural development in Sri Lanka.
The projects will focus on promoting economic growth in the rural and estate sectors and increasing communities' involvement in the use of the resources in their districts by strengthening small businesses, increasing the involvement of women and young people in decisions about job creation, and building awareness of Chronic Kidney Disease.
Tung-Lai Margue, the Ambassador of the Delegation of the European Union to Sri Lanka and the Maldives, said "The people in these districts of Uva and Central Provinces are among the poorest and most vulnerable in the country. The European Union wants to help deliver tangible and sustainable improvement in these people's lives by improving development in these regions in a way that is economically and environmentally sustainable."
In Sri Lanka, EU development cooperation for the period up to 2020 is focusing on supporting the areas of Integrated Rural Development, and Reconciliation and Democratic Governance.