The IDPs left the town despite assurances by Puntland authorities that their lives and property would be safe.
"I arrived here [in the town of Beletweyne] four days ago with about 50 other families," said Abdinasir Sheikh, one of the displaced who fled north Galkayo.
Fear was the driving force behind the IDPs' flight after attacks by mobs targeting them and their businesses over suspicions that they were involved in explosions in the town, Sheikh said.
Thousands of people from southern Somalia had fled north to Puntland in recent years as violence escalated in their home areas.
"Two weeks ago we were attacked, beaten and robbed of our belongings and businesses," Sheikh said. "It got too dangerous, so we decided to leave."
He claimed that the locals had spread rumours that IDPs were involved in explosions in the town under the "mistaken" belief that the southern IDPs were sympathetic to the Islamist group Al-Shabab.
"We simply were trying to make a living; we don't belong to any group," said Sheikh.
Sheikh said hundreds more had joined the thousands of IDPs in camps in the town of Beletweyne, the regional capital of Hiiraan in central Somalia.
Sheikh, who is a member of a committee for the displaced, estimates that between 4,800 and 6,000 people have fled Puntland since the attacks started two weeks ago. Others have already moved on to Bay and Bakol region in southwestern Somalia, he said.
"Most of us are originally from Bay and Bakol and some families have already gone there," Sheikh added.
A local journalist told IRIN: "Even today [23 December], many families are arriving in overcrowded trucks. I just saw two trucks loaded with families with small children. They have been coming like this for the past 10 days."
He said the displaced were arriving "with very little and there is not much help in place. They will have to fend for themselves."
Awliyo Sheikh Yusuf, a 37-year-old mother of four, arrived in Beletweyne on 23 December, along with other families fleeing uncertainty in Puntland.
"We went there to find a peaceful and safe place and for two years we had that, until they started attacking us for being from the south," she said.
Yusuf said many of the displaced in Puntland survived on odd jobs or had set up small businesses. "It got to the point where I was afraid to go out. I was there for two years and never experienced anything like this, but now I am on the run again."
She said her group of three trucks journeyed for two days from Garowe, the capital of Puntland, to Beletweyne. "I don't know what I will do now. We have nothing."