Sri Lanka fight back after strong start by Australia's Marsh, Head
The Australians came into the Group B game under pressure after their shock defeat by Zimbabwe last week and got off to a powerful start, with both openers scoring half-centuries.
Marsh and Head added 104 off 51 balls for the first wicket but the lower order didn't finish things as well as they should have, with the last six wickets falling for just 21 runs in the space of 24 balls.
Marsh, who missed the first two games through injury, looked solid hitting five successive fours off a Maheesh Theekshana over as Australia raced to 70 for no loss in the first six overs of power play.
Marsh's half-century came off 25 deliveries, while Head reached his milestone in 27 balls.
Australia looked on course to post a big total with the openers at the crease, but their dismissals slowed things down as Sri Lanka's spinners came to the rescue with clever bowling.
Leg-spinner Dushan Hemantha was the pick of the bowlers, finishing with three for 37.
The tournament co-hosts suffered a cruel blow when pace bowler Matheesha Pathirana limped off the field with a left calf strain after sending down just four deliveries.
He will undergo scans to assess the injury on Tuesday. Sri Lanka have already lost Wanindu Hasaranga and Eshan Malinga to injury so far.