Papua New Guinea's secretary for Lands, Pepi Kimas, says returning some land to traditional landowners could allow the permanent resettlement of Manam Islanders on the mainland to go ahead.
All Manam Islanders were evacuated to mainland care centres after a series of volcanic eruptions over the past four months.
Three government owned land plantations, Potsdam, Asuramba and Mangem, which were purchased in 1994, have been earmarked for evacuees.
But Mr Kimas says some of the land has since been used by traditional landowners for their crops and the Government is considering splitting the plantations to avoid any confrontation.
"The minister is very very cautious, because of the belief that we are to solve a problem, and whatever solution we arrive at, it will have long lasting effects. Our priority now is to see to it that Manam Islanders are given some proper place to live."