Tropical homegardens hold a large potential for climate change mitigation and adaptation due to their multi-functional role in providing income and ecosystem services while decreasing pressure on natural forests. However, there is still lack of quantitative data on homegardens and their landscape potential for carbon sequestration services. In this study, tree diversity and above-ground biomass carbon of woody species was estimated on dry-zone homegardens in the dry south-eastern part of Sri Lanka. A total of 45 homegardens were sampled on size, floristic composition of trees, diameter at breast height (GBH) and height of trees. In total, 4278 trees were sampled and 82 different tree species were recorded. The Shannon Wiener index used to evaluate biodiversity ranged from 0.76–3.01 with a mean value of 2.05. Using allometric models, we find a mean above-ground biomass stock of 13 Mg carbon (C) ha^-1 with a large range among homegardens (1–56 Mg C ha^-1, n=45) due to a variation of tree diversity, species and composition between individual homegardens. Per unit area basis, mean above ground carbon stock was higher in small homegardens (<0.2 ha, 26 Mg C ha^-1, n=11) than medium (0.4–0.8 ha, 9 Mg C ha^-1 n=27) and large (>1 ha, 8 Mg C ha^-1, n=7) homegardens due to a higher tree density. The results show a vast heterogeneity in terms of carbon and biological diversity within the dry zone homegardens; results that will contribute to closing the knowledge gap of the less studied dry-zone homegarden systems and their functions in storing carbon and providing multi-functional benefits to its users. The results are also useful for whether homegardens should directly or indirectly be considered to be included as an activity within Sri Lanka’s newly commenced UN-REDD National Programme.