The objective of this study was to examine the associations between students' perception of physical and psychosocial school environment and satisfaction with life among secondary school students in Colombo District, Sri Lanka. Data were collected from 20 Sinhala-medium secondary schools between January and February in 2010. A questionnaire-based survey was conducted with students in grade seven (n = 342) and grade ten (n = 446). Multivariate logistic regression analysis, adjusted for confounding variables, was used to assess the associations between students'satisfaction with life measured by Cantril ladders, and scores of perceived physical and psychosocial school environment that focused on school cleanliness and attractiveness, relations with teachers and peers, satisfaction with school and bullying. Students in the highest quartile of school environment score were significantly more likely to have high life satisfaction, compared to those in the lowest quartile (adjusted odds ratio 2.32; 95% confidence interval 1.35-3.99). Odds ratio of high life satisfaction increased with increasing school environment scores (p for trend<0.001). In conclusion, students who perceived positive school environment were significantly more likely to have high life satisfaction. Positive changes in the focused areas of school environment have the potential to lead to improved life satisfaction of students.