It urged the Centre to lodge its "strong protest" with Colombo against the legislation.
Drawing Prime Minister Narendra Modi's attention towards the bill, "reportedly introduced and passed in the Sri Lankan Parliament," Chief Minister K Palaniswami said it prohibited certain fishing methods including bottom trawling.
"It is widely reported in a section of media that under the provisions of the Fisheries and Aquatic Resources (Amendment) Bill, the fishing trawlers as well as fishing gear used for fishing in the Sri Lankan territorial waters will be confiscated, fishermen imprisoned for two years and huge fine upto 50,000 Lankan Rupees will be imposed," he said in a letter to PM Modi.
The Palk Bay was a "historic and traditional fishing area" of fishermen from Tamil Nadu." Their historical rights "were simply signed away as part of the ill-advised Indo-Sri Lankan agreements of 1974 and 1976 which also unilaterally ceded Katchatheevu to Sri Lanka without having any foresight or concern for the plight of our innocent fishermen," he said.
Consequently the right to livelihood of the state's fishermen, who historically and traditionally fish in the Palk Bay, continues to be infringed upon by Lankan authorities, Mr Palaniswami said.
"The new bill reportedly introduced and passed by the Parliament of Sri Lanka is another retrograde step taken by the Sri Lankan Government to destroy the already paralysed livelihood of lakhs of our fishermen," he said.
The passing of the "ill-advised" bill came at a time when the ministers of India and Sri Lanka as well as the Joint Working Group on Fisheries had met only recently to resolve the Indo-Sri Lankan fishermen issues and therefore it was "shocking," he said.
He said this "unilateral move" by Colombo will "definitely hamper" the joint initiatives taken by the governments of the two countries on the fishermen issue.
"The legislation proposed is, in fact, a severe setback to the diplomatic efforts being taken to resolve the issue amicably," he said.
The bill is aimed at preventing the state's fishermen from exercising their traditional fishing rights in the fishing waters in which they have continued to fish for several centuries and will deny their fundamental rights conferred by the Constitution of India, he said.
"The move by Sri Lankan Government to introduce the bill at this crucial juncture of transition towards a permanent solution is nothing but a harsh step to undermine the diplomatic efforts being undertaken by the Government of India to sort out the sensitive issue," Mr Palaniswami said.
A livelihood issue of this nature was better resolved through promotional and developmental measures to introduce alternative modes and technologies, and not through such abrupt bans and punitive measures, he said.
He urged the Centre to register its "strongest disapproval" of such move and organise an "effective defense of the rights of our fishermen in the Palk Bay."
He appealed to the prime minister to direct the External Affairs Ministry and Indian Mission in Lanka to "immediately, appropriately and effectively respond to this latest move by the Sri Lankan side, which would permanently debilitate the livelihood of our fishermen in the Palk Bay."
Besides registering "strong protest", India should ensure that necessary provisions are made in the new legislation to exempt the traditional waters of Palk Bay from its purview, Mr Palaniswami added.
The chief minister said 50 fishermen from Tamil Nadu and 143 fishing boats were under Lankan custody since 2015 and reiterated his earlier demands for their release.
Meanwhile, opposition DMK and Congress also raised the issue of the Lankan bill in the Tamil Nadu Assembly.
Responding to them, Finance and Fisheries minister D Jayakumar said the Lankan move was "not acceptable" and assured them that the matter would be taken up with the Centre.