Two decades ago, people moving from home countries to other countries would not have had the opportunity to remain actively engaged or even adequately informed of events in their home countries. Policy makers and scholars had a somewhat limited understanding of diasporic communities and their importance. Today, with the diminished saliency of the nation-state, the impact of globalization and the growing number of transnational migrants, this has changed. Diasporic groups, capable of maintaining and investing in social, economic and political networks that span the globe, are of increasing relevance and interest to policy makers in home countries as well as host countries. This paper critically approaches the question of diaspora and outlines possibilities for policy makers in addressing the issues posed by the diaspora in the Sri Lankan context. Based on extensive fieldwork in Canada, France and Sri Lanka the concept of “diaspora circulation” is proposed as an effective tool for engaging the diaspora in a meaningful way in the reconstruction and development of war-torn areas in Sri Lanka. It is also suggested that the host countries as well as the home countries need to reformulate citizenship, migration, and development policies in order to facilitate the constructive involvement of diaspora.