Background Complex situations that follow war and natural disasters have a psychosocial impact on not only the individual but also on the family, community and society. Just as the mental health effects on the individual psyche can result in non pathological distress as well as a variety of psychiatric disorders; massive and widespread trauma and loss can impact on family and social processes causing changes at the family, community and societal levels. Method This qualitative, ecological study is a naturalistic, psychosocial ethnography in Northern Sri Lanka, while actively involved in psychosocial and community mental health programmes among the Tamil community. Participatory observation, key informant interviews and focus group discussion with community level relief and rehabilitation workers and government and non-governmental officials were used to gather data. The effects on the community of the chronic, man-made disaster, war, in Northern Sri Lanka were compared with the contexts found before the war and after the tsunami. Results Fundamental changes in the functioning of the family and the community were observed. While the changes after the tsunami were not so prominent, the chronic war situation caused more fundamental social transformations. At the family level, the dynamics of single parent families, lack of trust among members, and changes in significant relationships, and child rearing practices were seen. Communities tended to be more dependent, passive, silent, without leadership, mistrustful, and suspicious. Additional adverse effects included the breakdown in traditional structures, institutions and familiar ways of life, and deterioration in social norms and ethics. A variety of community level interventions were tried. Conclusion Exposure to conflict, war and disaster situations impact on fundamental family and community dynamics resulting in changes at a collective level. Relief, rehabilitation and development programmes to be effective will need to address the problem of collective trauma, particularly using integrated multi-level approaches.