Forest cover in Sri Lanka has declined drastically during the last century. Some of the remaining forests, which are under protection, harbor high levels of biodiversity and endemism. Illegal timber extraction is the most important cause of deforestation at present. The illegal logging now occurring in unprotected forests may extend to protected forests, if necessary policy measures are not implemented.  The main policy currently employed to limit deforestation is a timber permit system. This study assesses that policy and four alternative policy measures