1222 GMT January 22, 2018
Chinese authorities had sought clearance for a port call at Colombo where a Chinese state-owned company operates a mega container terminal, the official said asking not to be named.
"They have asked for permission, but we have said no," the official told AFP. "It is a very sensitive matter." He did not elaborate.
The rejection came as Indian Prime Minister Narendra Modi was visiting Sri Lanka as chief guest of Vesak, the island's main Buddhist celebration.
The request for the Chinese submarine visit was for next week, after Modi's departure on Friday evening, official sources said.
There was no immediate comment from the Chinese embassy in Colombo, but two submarine calls at the Colombo harbor in 2014 had reportedly angered India which considered it as undermining their security.
New Delhi traditionally regards its smaller neighbor as being within its sphere of influence. New Delhi is said to have been worried about Beijing's growing influence on Colombo under the former regime of strongman president Mahinda Rajapakse.
Sri Lanka's new President Maithripala Sirisena came to power in January 2015 promising to loosen ties with China after a decade of hefty funding by Beijing under his predecessor.
However, analysts have noted that Beijing's influence was on the rise again as Colombo struggles to find alternative sources of much needed foreign capital.