The Sri Lankan authorities say they are releasing 136 Indian fishermen who were held for fishing in Sri Lankan waters.
The move follows a flurry of diplomatic meetings between the two countries. India originally described the arrests as "unacceptable".
Fishermen in northern Sri Lanka have told the BBC they are annoyed about Indian trawlers entering their waters.
Last month villagers in southern India accused the Sri Lankan navy of killing two Indian fishermen at sea.