The decline of the coir fiber industry in Sri Lanka, which brings valuable foreign exchange, has been a subject of concern as Sri Lanka is a main supplier of coir fiber to the world market. The repercussions of this decline on the country are enormous. In this article we analyze this crisis situation to find the causative factors and to propose recommendations for the development and sustainability of the industry. The main factors contributing to the crisis are unfavorable trade policies, trade barriers, human resource problems, poor trade behavior, export barriers, poor product marketing strategy, the high cost of production, poor industry regulation, and threats from the global marketing environment. Recommendations for the development of the industry include policy changes, improved working conditions, trade strategies, product diversification, mechanization, quality assurance, market development, strengthening of market position, and regional cooperation. We present a comprehensive long-term strategy for the future development of the coir fiber industry of Sri Lanka. [EconLit citations: O530, Q130, Q170.] © 2004 Wiley Periodicals, Inc. Agribusiness 20: 495-516, 2004.