In resettlement planning literature, much has been written on economic, land valuation and compensation, infrastructure and services aspects of the land. Psychological risks and stresses of resettled communities, however, have been under-researched. The current research looks at the psychological risks of resettlers in a Development-Induced Displacement and Resettlement (DIDR) project in Sri Lanka. Focusing on the stages of resettlement planning process discussed by Scudder and Colson four-stage model (1980) and the psychological risks discussed by Cernea’s (1990) impoverishment risks and reconstruction (IRR) model. This study evaluates the significant level of the psychological risks faced by the communities in DIDR projects in Sri Lanka relating to before and after resettlement. Moragahakanda Resettlement Project (MRP) was selected as the case study which is located in Naula DS division of Matale District, Central Province, Sri Lanka. A questionnaire survey, documents and field observations were used to evaluate the current psychological risks. The responses received from multiple choice questions were analyzed by Significant Point (SP) index. The research findings point that there are no conspicuous changes of psychological risks related to before/after resettlement has occurred in re-settlers. The findings highlight that the psychological risk levels in transition stage have remained the same level in the potential development stage. This research provides a systematic guidance enabling the physical planners to prioritize the most significant psychological risks which should be considered in the decision-making process of DIDR projects.