Bhutan, who are the worst football team in the world according to the FIFA rankings, were over the moon after Tshering Dorji scored the only goal of the match in the 84th minute.
The win allowed Bhutan to avenge their 5-2 loss to Sri Lanka at the 2013 South Asian Football Championships in Kathmandu.
"It’s a very happy moment for my life," Dorji told The Guardian. "It was moment that I have been waiting for … it was a precious moment to score, and it was a perfect moment to score the goal."
FIFA president Sepp Blatter hailed Bhutan's victory as "a wonderful, historic moment" on Twitter.
Sri Lanka head coach Nikola Kavazovic slammed his team for underestimating Bhutan, who were once beaten 20-0 by Kuwait in an Asian Cup qualifier in 2000.
However, he remains confident that his side will make up for their loss when the two nations face each other again on Tuesday.
"They were a better team and they deserve to win," Kavazovic said. "We thought the Bhutani team [were] going to be easy but the things were totally different on the field. I’m still convinced that we are going to win the second stage."