The Kanak and Wallis and Futuna communities in the New Caledonian capital, Noumea, have agreed to end 11 months of inter-communal fighting in the Noumea suburb of St Louis.
The conflict had left three people dead and many more seriously unjured.
The accord was reached at the monthly meeting of Kanak and Wallisian leaders and local authorities, organised by the French high commissioner.
The agreement came about after Wallisian families accepted a resettlement plan proposed by the Southern Province.
About half of the 140 Wallisian families present in St Louis at the start of the hostilities have already moved away.
The remaining families will be resettled within the coming year.
French police who have been camped inside the village between the two communities since hostilities started, left the site on Thursday.
However, they will maintain their post just outside the village on the main road that links Noumea to the south of New Caledonia.
The police have made it clear they will continue their investigations to find the perpetrators of the violent incidents in St Louis over the past year, and that legal action against those accused of criminal offences will be maintained.