About 61,000 people who have fled the combat zone and are housed in a dozen "welfare camps" will instead be supervised by civil servants, Human Rights Minister Mahinda Samarasinghe said.
The UN's top humanitarian official, John Holmes, had asked the government to allow civilian authorities to manage the camps, Samarasinghe said.
"We have accepted the UN recommendation and camp management has now been handed over to the resettlement and relief ministry," Samarasinghe told reporters here.
International aid agencies and rights groups have repeatedly called for a pause in fighting to allow a safe passage for tens of thousands of civilians still trapped by the fighting.
Samarasinghe dismissed reports that the government may be contemplating a truce, as the Sri Lanka government insists that the Tamil Tiger rebels must surrender unconditionally.
The military says the Tigers are facing imminent defeat after nearly four decades of fighting for a separate homeland for minority Tamils.