Australia's Foreign Affairs Minister, Alexander Downer, says Indonesia has also agreed to continue aid to the refugees.
But he says Indonesia wants them to choose by tomorrow whether they want to live in Indonesia or East Timor.
Mr Downer says the Indonesian Government has agreed to separate militia groups from the refugees, to hopefully allow them to make their decision without fear.
"Our greatest concern has been the militia activity in the camps and the intimidation and harassment by militia elements of some of the refugees. To say this, we are very pleased here that the Indonesians are going to do their very best to separate the militias from the ordinary refugees," he said.
"No doubt everyone will say that should have happened long ago and that is a fair point but we are glad that they're focussing on that now," Mr Downer said.
=A9 1999 Australian Broadcasting Corporation
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