The loss means that they are rooted to the bottom of the point table and would have to beat Pakistan on Sunday to deprive the Sri Lankans of a place in the final.
England 'A' lost wickets at regular intervals as they were packed out for a paltry 166. Owais Shah spared the blushes with a fighting 55 in a lost cause.
For Sri Lanka 'A', Malinga Bandara and Suraj Mohamed shared the spoils grabbing three wickets apiece.
Earlier, England 'A' bowler David Harrison claimed 4 wickets for 36 runs as they bowled out Sri Lanka A for 225 two balls short of their stipulated 50 overs.
Saman Jayantha led the way with a fine 45 while Test discard Russel Arnold chipped in with a handy 42 for the the hosts who are in a must-win situation to prevent a England-Pakistan final in this series.