The CLD broke up with the UNP in 1982 over the 1982 referendum, which postponed parliamentary elections for six years.

After four years of attempts to promote liberal thinking in Sri Lanka, in particular with regard to constitutional reforms that would promote devolution along with separation and reduction of powers at the center, Dr Amaratunga and several of his associates eventually relaunched the CLD as the Liberal Party in February 1987.

It contributed seminally to the manifestoes of presidential candidates Sirimavo Bandaranaike and Gamini Dissanayake in 1988 and 1994 respectively.

In 1996, Dr Amaratunga died in a car accident, which led to a significant reduction in party activity.

Amaratunga's successor Rajiva Wijesinha contested in the 2000 parliamentary elections and came 6th in a field of 15, a success that served to advance the image of the party.