Madugalle continued as a vital part of the Sri Lankan Test and ODI team, only missing one international game between 1979 and 1984. However, his ODI performances worried the Sri Lankan selectors, with only one fifty from 25 innings. He was shuffled around the order in an attempt to gain some form, but after scoring a duck in the second and last ODI against New Zealand in 1984, he was dropped for the first three matches of the 1984–85 World Series Cup in Australia. A couple of seasons followed where he was in and out of the team, but a major reorganisation of the squad following the tour of India in 1986–87 gave him the chance again, and he seized it with a Test 60 against New Zealand.

Madugalle was never a good tourist, only averaging 21.50 with the bat abroad, while he averaged 42.76 on traditionally tricky Sri Lankan pitches. Indeed, his only century came in a home match – the first match of the 3-Test series against India in 1985. Madugalle took nearly seven hours to forge his 103, but it ensured in a drawn match. In the next match, he only batted once, making 54 from number three to build a solid platform for the next batsmen, which eventually led to a comfortable 149-run victory. They drew the third Test – despite scores of 5 and 10 from Madugalle, and Sri Lanka had won their first Test series.

In 1988 he was appointed captain of the Sri Lankan cricket team, but his team troubled neither Australia, nor England under Madugalle's leadership. Madugalle himself recorded four sub-20 scores as captain, and the two Tests he captained became his last. He also captained the ODI team in his last 13 matches, winning two and losing eleven, but again he failed to back up his captaincy with runs – only passing 25 twice. However, Sri Lanka did win in his very last match, with a five-wicket win over Pakistan in the 1988 Asia Cup – in which Madugalle did not bat.

He also played league cricket in England – particularly in 1979 for Flowery Field Cricket Club, who were then in the Saddleworth League.

Madugalle only made two international fifties after the '85 India series, both in Tests, and eventually he retired to become a marketing executive in a multinational corporation. But the lure of the cricket grounds became too strong, and he became involved as a match referee in 1993. He progressed through the International Cricket Council ranks, refereeing 77 Test matches and 169 ODIs. Thus, he has officiated in many more international matches than he has played. In 2001, he was appointed as the chief match referee by the ICC. In addition to being seen as an establishment man, his record in being impartial has been questioned - when to seem fair rather than act fair, he was harsh on Asian teams while being relatively light on Australian teams.^[9]