The president has appointed Medawala on account his seniority, according to the sources.
The position had been vacant following the retirement of Maj. Gen. Milinda Peiris.
A one-time military spokesman, Medawala was sent to Aluthgama to restore normalcy after Bodu Bala Sena and other religious extremist groups created tensions there during the previous regime.
Currently serving as a Sri Lankan representative at the United Nations, he is presently on a visit to the country.
The new DCoS Gunatilake succeeds Maj. Gen. Sumedha Perera, who too, has retired.
Medawala and Gunatilake, together with Maj. Generals Boniface Perera, Upul Vithanage, Sudantha Ranasinghe, Mahesh Senanayake are the most senior Army officers in that order after incumbent commander Lt. Gen. Krishantha de Silva.
If not given extensions, Medawala is due to retire in December and Gunatilake in March.