The arrests come following the sinking of a number of vessels as people smugglers continue to carry illegal immigrants to Australia from various countries.
Some 94 people are believed to have drowned after two boats sank in recent weeks.
The 40 arrested in the eastern district of Batticaloa last night, including a woman and two children, were all Sri Lankan nationals.
Police spokesman Ajith Rohana said they had been about to board two small boats taking them to a larger vessel that would make the three- to four-week journey to Australia.
“It is a tragedy that these people are becoming victims of people smugglers,” Rohana said. “We are seeing an increase in this trend.”
Each person had paid up to $2,000 to make the trip.
Canberra is facing a steady influx of asylum-seekers arriving in Australia by boat, many of whom use Indonesia as a transit hub, boarding leaky wooden vessels there after fleeing states such as Afghanistan and Iran.
While most boats originate in Indonesia, there has been a recent spike in attempts from Sri Lanka.
Australia wants to deter boatpeople by transferring them to Malaysia for processing, in exchange for accepting thousands of that nation’s registered refugees for resettlement.
But the minority government has been unable to pass the required legislation through parliament because the left-leaning Greens and conservative opposition have refused to back it.