Minister Lohan Ratwatte was accused of threatening two former Tamil rebels at gunpoint in a jail in Anuradhapura, 180 kilometres north-east of the capital, on Sunday.
The two inmates were once members of the Liberation Tigers of Tamil Eelam. They were in custody for their involvement in the 26-year civil war that ended in 2009.
The minister threatened them and said “it is we who decide on when you will be released,” according to other inmates.
In another incident, he stormed into a Colombo jail with friends at his side because he wanted to show them the gallows where prisoners were hanged to death prior to 1976. The gallows are no longer in use.
The office of the Sri Lankan president said Ratwatte had submitted his resignation.