In this study a spatially explicit economic analysis was employed to determine the land use change in a traditional coconut growing district of Sri Lanka. From a theoretical model of land use, an econometric framework was developed to incorporate spatial and individual effects that would affect the land use decision. Markovian transition probabilities derived from the econometric analysis and spatial analysis was used to predict the land use change over the next 30 years. The results revealed that the fragmentation and conversion of coconut lands to urban continue in the areas close to the urban centre and also with less productive lands. Spatial analysis provides further evidence of the positive trend of conversion of coconut lands to urban uses close to the urban areas.