Sri Lanka has arrested 37 Chinese fisherman on suspicion of fishing illegally off its eastern coast.
A spokesman for Sri Lanka's navy told the BBC two Sri Lankan nationals had been held along with the Chinese.
The navy says it found the men aboard two trawlers fishing in waters off the east coast town of Batticaloa.
China has called for the men to be released. The arrests are being seen as a test of increasingly close ties between Beijing and Colombo.
The fishermen were arrested on Sunday night, Chinese state news agency Xinhua reported.
"They are in our custody and they have not been released yet," navy spokesman Kosala Warnakulasuriya told Reuters news agency on Monday, after Xinhua said the men had been freed.
A Sri Lankan police spokesman told the BBC Sinhala service the two Sri Lankans were due to appear in court on Tuesday. The fate of the Chinese remains unclear.
China's embassy in Colombo had "urged Sri Lankan authorities to handle the issue in accordance with the law, sort out the truth and release the Chinese fishermen as soon as possible", Xinhua reported earlier.
Analysts say the incident is unusual, but Chinese fishermen are increasingly travelling further afield because of a lack of fish closer to home.
China has considerable influence in Sri Lanka, whose location in the Indian Ocean makes it of major strategic interest.
Beijing has loaned the country millions of pounds for infrastructure projects, including assistance for a sea port in the south at Hambantota.
Sri Lanka's government says its growing ties with China are purely commercial. But some analysts speculate that Beijing is seeking a naval facility, a prospect that worries Sri Lanka's close neighbour India.