Some 85 busses transported refugees within this district from relief centres in Kantalai and take them to their homes in the Muslim fishing town of Muttur.
"We started the process today in a big way because the fighting has died down in those areas," a spokesman for President Mahinda Rajapakse's office said in Colombo, 260 kilometres (160 miles) from here.
"More civilians want to return.
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Officials here said about 10,000 Muslims had been moved out of relief centres within the district and taken home.
"Two refugee welfare centres closed today and seven more are functioning, but they have less than 5,000 people in them," a district official said.
Heavy fighting between soldiers and the rebel Liberation Tigers of Tamil Eelam (LTTE) in August at Muttur, just 10 kilometres (six miles) across Koddiyar Bay, forced 40,000 civilians to flee the town and surrounding areas.
Action Against Hunger, a French charity, lost 17 local staff in the fighting when they were shot dead at Muttur in ea