The Mannar Basin is a frontier failed rift basin between India and Sri Lanka. The Sri Lankan part has an area exceeding 42,000 km2. Although the recent two gas discoveries have confirmed the existence of an active petroleum system in the Mannar Basin, a major portion of the basin is still poorly explored. This article summarized the progress of current exploration activities and the hydrocarbon potential of the Mannar Basin. This basin began to evolve since the Upper Jurassic and experienced two rifting events; an early Late Jurassic syn-rift phase associated with East–West Gondwana break up; and a later, earliest Cretaceous syn-rift phase associated with Antarctica separation from greater India around 142 Ma. Rifting was followed by a post-rift phase comprising a thermal sag period and an inversion period. Three potential source rocks intervals have been interpreted at Maastrichtian–Campanian, Albian–Aptian, and Late Jurassic stratigraphic levels. The basin modelling work has confirmed that (1) mature potential source rocks (mainly Type II) exist below the Maastrichtian–Campanian strata and (2) the best potential source rocks (mainly Type II) exist at Albian–Aptian stratigraphic levels. The Late Jurassic source rocks have more potential for gas, while other sources have potential for both oil and gas. According to basin modelling results, Maastrichtian–Campanian and Albian–Aptian source rocks reach the oil window in the present-day depocentre around 45 Ma and 80 Ma, respectively. The Late Jurassic source rocks (mainly Type III) reach the gas window around 112 Ma in the present-day depocentre. Five play levels were defined for the whole stratigraphic section of the Mannar Basin. Tertiary play level is dominated by submarine fans, mounds and rollover anticline like structures. The Upper Cretaceous play is dominated by forced-fold structures, intra-basalt turbidite sands, and sub-volcanic sand-rich systems. The Lower Cretaceous play is dominated by reefs and abrupt margin pinch outs. The Upper Jurassic play is dominated by abrupt margin pinch outs. The Basement play consists of weathered basement rocks. The main challenge of the Mannar Basin is imaging below the flood volcanic layer, which inhibits the penetration of seismic energy and results in low-quality seismic data. Therefore, hydrocarbon potential assessments have become a major challenge below the Upper Cretaceous. The interpretation shows that the basin has a low risk for the source and reservoir, and high risk for seal and traps. New exploration activity would unlock more potential areas for hydrocarbon accumulations. Finally, the findings of this study can help for better understanding of hydrocarbon potential areas and current progress of exploration activities in the Mannar Basin, Sri Lanka.