Taking the current situation characterised by the defeat of the Liberation Tigers of Tamil Eelam (LTTE) by the Sri Lanka military forces in May 2009 as a starting point, this article looks into the potential prospects for peace. The main part is based on an empirical case study conducted in the northern peninsula of Jaffna, where the LTTE lost their stronghold in the mid-1990s. The subsequent occupation of Jaffna by the Sri Lankan military forms the point of departure for an analysis of reconstruction and development efforts after the ceasefire of 2002. Based on a detailed analysis of shifting gender relations this article argues first that the interrelatedness of gendered and ethnic relations with regard to the construction of local "culture" produces meaningful markers for demarcationl. The second focus relates to local perspectives on the state as an actor in development and reconstruction. The article highlights that local actors' negotiating of the potential role of both the state and the LTTE are ambivalent and embedded in constructions of sameness and difference. The article concludes by shedding light on recent developments and Sri Lanka's future perspectives.