Beyond the death toll, the tsunami of 26 December 2004 crippled many of the livelihood assets (human, social, physical, financial and natural) available to assist those directly affected. Drawing on surveys of three villages in three districts in the south of Sri Lanka, this paper describes the livelihood asset building capacity of the fishing communities. Assessments are also made of the impact of the tsunami on coastal communities and the impact of government policy on rebuilding. A livelihood asset score was calculated for each village by comparing their strengths in capacity building. In all aspects of capital building, including human, social, financial, physical and natural capital, the fishing community in Tangalle was significantly ahead of the fishing communities in Hikkaduwa and Weligama. Experienced fishermen with better educational backgrounds had a significant influence on the capacity building of livelihood assets. Relocation and resettlement plans brought persistent uncertainty to fishermen in Hikkaduwa and Weligama and threatened to disrupt their community bonds and social networks.