The agency said more than 100 members of the National Freedom Front, a nationalist political party in Rajapaksa's ruling coalition, had protested at Fonterra Brand Lanka's head office, 30km north of Colombo.
As riot police watched, they held up banners saying, "We should make our own milk powder", and "Ban toxic yoghurt advertisement immediately", while carrying a coffin with large pictures of all Fonterra brands.
Mohammed Musammil, spokesman for the group, told protesters: "It is not a difficult task to close down Fonterra for a country which eradicated terrorism. We request all the people to unite to send Fonterra home in the same way they united to end the terrorism."
Fonterra and Sri Lankan authorities have been engaged in a war of words over the last few weeks over the safety of some of the co-operative's products.
Earlier this week, Fonterra said it had received notification of a temporary injunction to prevent it selling its products in Sri Lanka.
The co-operative has rejected allegations that its products contained agricultural chemical dicyandiamide, or DCD. The whey protein concentrate products that were the subject of a product recall earlier this month had not been sent to Sri Lanka.
In yesterday's statement, chief executive Theo Spierings said Fonterra had suspended its operations in Sri Lanka as a precautionary measure because the situation there had become "unstable".
He said in a statement that Fonterra had two priorities - protecting its people and protecting its farmer shareholders' assets.
"The temporary suspension is the right thing to do," he said. "It is a precautionary measure to ensure our 755 people working there are safe. We have closed our plants and office in Sri Lanka, and have asked our people to stay at home."
Spierings said Fonterra had provided assurances to the Sri Lankan authorities about the safety and quality of Fonterra's products.
"Recent events, however, have made it difficult to maintain day-to-day operations, and we need to get them resolved," he said.
Fonterra is the subject of an "enjoining order" which has shut down its ability to sell product, advertise it or make public statements in any way with customers or consumers in Sri Lanka.
"We are also working with Sri Lankan and New Zealand government authorities on a long-term sustainable solution for our Sri Lankan customers, communities and dairy sector," he said.
New Zealand has had a presence in the Sri Lankan dairy market for 35 years and is a significant player in the local market, taking supplies from 4000 local farmers.
New Zealand Economic Development Minister Steven Joyce declined to be drawn on whether the protests were politically motivated, but he said there had been discussion in Sri Lanka about the development of its dairy industry.
The country buys about $260 million, or 2 per cent, of New Zealand's dairy exports a year.
