Identifying mechanisms to finance environmental conservation is crucial to achieve sustainable development. Pharmaceutical prospecting has been touted as a mechanism with prospects to generate revenue to conserve biodiversity. Pharmaceutical prospecting could improve with the use of prior information to guide pharmaceutical prospecting research. Such prior information could be traditional knowledge on use of biodiversity for medicinal purposes. Sri Lanka is richly bestowed with both biodiversity and traditional knowledge of the use of it for medicinal purposes. This paper, through review of the literature and empirical estimation of the willingness to pay for pharmaceutical prospecting, has estimated the complementary value of biodiversity and traditional knowledge of its use, in Sri Lanka. The Knuckles forest has been used as the demonstrative case for analysis. It is found that pharmaceutical prospecting has reasonable potential to generate revenue to conserve biodiversity in Sri Lanka. Thus, it is recommended that legislations, institutions and mechanisms, which are required to establish property rights on biodiversity and traditional knowledge, be expeditiously established to facilitate pharmaceutical prospecting. Given the social and political sensitivity of pharmaceutical prospecting, broad public consultation should be sought, prior to implementation of pharmaceutical prospecting.