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Sri Lanka is a biodiversity hotspot and one of the richest geographical locations of marine sponges in the Indian ocean. However, the most extensive taxonomical study on Sri Lankan sponge biodiversity dates back similar to 100 years and only a limited number of studies have been conducted on sponge natural products. In the current study, 35 marine sponge specimens (collected from 16 sponge habitats around Sri Lanka) were identified, microfractionated and evaluated for antibacterial and anticancer assays. In total, 30 species were characterized, of which 19 species gave extracts with antibacterial and/or cytotoxic activities. Microfractionated organic extract of Aciculites orientalis gave the most potent antibacterial activity against Staphylococcus aureus and strongest lymphoma cell toxicity was exhibited by the organic extract of Acanthella sp. Guided by the molecular ion peaks in the bioactive fractions, large-scale extraction of Stylissa massa led to the isolation of three bromopyrrole alkaloids, sceptrin, hymenin and manzacidin A/C. Of these, sceptrin exhibited broad spectrum antibacterial activity against both Escherichia coli and S. aureus (MIC of 62.5 mu M against both species). Based on natural product literature, seven promising species were identified as understudied. Their further exploration may lead to the discovery of structurally novel compounds.