Bowling with genuine pace from the Nursery End after Sri Lanka had set off in pursuit of England's first innings 551 for six declared, Mahmood cut through the middle-order after Matthew Hoggard had removed both the openers cheaply.
Captain Mahela Jayawardene and wicketkeeper Kumar Sangakkara steadied the innings and took the total to 81 before Andrew Flintoff handed the ball to Mahmood.
Mahmood responded by inducing a loose shot from Sangakkara (21), who smacked his pads in anger, after steering the ball to Marcus Trescothick at first slip.
Thilan Samaraweera fell lbw without scoring as did debutant Chamara Kapugedera, who was out first ball when a full toss struck him on the front pad.
Tillekeratne Dilshan ran himself out, also without scoring, after a horrible mixup with Jaywardene, who was himself lucky to remain at the crease after he was dropped on 34 off Flintoff by wicketkeeper Geraint Jones.
HIGHEST TOTAL
England's highest total against Sri Lanka was anchored by Kevin Pietersen, who equalled his best score of 158 after resuming on 54.
He lost nighwatchman Hoggard bowled by Chaminda Vaas for seven then found an ideal partner in Paul Collingwood, a tough character with no intention of relinquishing the Test spot he confirmed in India this year.
Muttiah Muralitharan took two of the three wickets to fall on Thursday's opening day and on Friday he was back in harness within the first hour from the Pavilion End.
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Muralitharan scattered seven fielders on the leg side, a problem Pietersen solved by lofting the ball over their heads for six.
He brought up his century by guiding Muralitharan through the vacant slip area and 10 runs later passed the 1,000 runs in only 10 months of Test cricket.
Pietersen was given a life on 138 when an attempted sweep off Muralitharan struck his gloves and lobbed over the wicketkeeper. Jaywardene ran around from short fine leg and dived for the ball but was unable to hold on to the catch.
A wristy on drive for four off a Vaas full toss took Pietersen to 158, the same score he made to help defeat Australia and win the Ashes last September.
But he was out immediately after lbw to the persevering left-arm swing of Vaas.
Collingwood fell five balls later, comprehensively bowled by Muralitharan for 57, leaving time for a lively unbroken 49-run partnership between captain Flintoff (33) and Jones (11).
Flintoff enjoyed himself at Muralitharan's expense, smiting two sixes over mid-wicket before declaring 20 minutes before the scheduled tea interval.
Hoggard, opening the bowling from the Nursery End, made the ball duck in late to trap left-handers Jehan Mubarak (0) and Upul Tharanga (10).
He was partnered by Flintoff, who worked up a fiery pace from both ends and was unlucky not to capture the wicket of Jaywardene who was dropped by Jones on 34 with the total on 77.
