Coconut oil is a significant dietary component in Sri Lanka and serves as the primary source of fat for Sri Lankans, primarily used for culinary purposes. This review focuses on the quality and safety concerns within the coconut oil processing industry of Sri Lanka. The study collected data through interviews with industry personnel, conducted field visits to both small-scale and large-scale operations, and analyzed existing research. Several factors impact the quality and safety of coconut oil products. Key issues include the increase in free fatty acid content, the production of aflatoxin in copra, phthalate contamination from packaging, and the contamination of coconut oil with polyaromatic hydrocarbons (PAH). These quality and safety concerns result from cross-contamination with metals and other chemicals during equipment use, a shortage of trained personnel, insufficient laboratory testing of oil quality parameters before market distribution, and inadequate surveillance of small and medium-sized oil mills by regulatory bodies. Additionally, the local market faces high levels of adulteration, where coconut oil is mixed with lower-quality oils, stored improperly, or is of overall poor quality. Issues related to coconut cultivation include a decline in yields due to inefficient land usage, reduced productivity, climate change impacts, pest infestations, diseases, and increased production costs. The adulteration problem arises from the supply-demand gap for coconut oil in Sri Lanka and the high cost of producing one litre of good-quality coconut oil. The Sri Lankan government and the Sri Lanka Standards Institution have introduced a product standard for coconut oil production, outlining key parameters for the final product. Nevertheless, the absence of a comprehensive process standard affects quality control throughout production. Small and medium-scale producers lack awareness of SLSI standards, leading to non-compliance, along with an absence of regular quality and safety checks. Consequently, stringent enforcement is necessary to address these challenges. While improvements have been made, unresolved issues remain; therefore, a quality assurance system for the coconut oil processing industry is an urgent requirement, especially for small and medium-scale oil production facilities, which are key suppliers to the local market.