Vaudine England in Jakarta – Children snatched from refugee camps in East Timor and taken to central Java two years ago were reunited with their parents yesterday.

Independence hero Xanana Gusmao also welcomed home the families of former pro-Indonesian militiamen. His move came as mass refugee returns resumed across the border with Indonesian West Timor.

The reunions of the 10 children and their parents in Bali – a joint operation by the United Nations High Commissioner for Refugees (UNHCR), the Indonesian Ministry of Foreign Affairs and the International Organisation for Migration – was the first achievement in a two-year process aimed at retrieving at least 124 children taken from refugee camps in West Timor by an Indonesian foundation.

The children were put in Indonesian schools and looked after at Catholic orphanages in Java. The Hati Foundation appeared to want to produce a new generation of East Timorese who would reject independence in favour of Indonesian rule.

Until yesterday, efforts to persuade the foundation's maverick Octavio Soares to return the children had failed. But he was present at yesterday's reunion and "appeared to be behaving okay so far", a source present at the meeting said.

"The handover is happening as we speak," said a UNHCR source at the Bali reunion. "There has been a lot of anxiety here today. Some children and parents immediately found the right tone with each other. With some others, they will clearly need more time together."

Assuming no last-minute hitches occur, that time will come when the parents and children are brought back from Bali to East Timor today and begin new lives together, after the rupture of the violence and destruction caused by Indonesia after East Timor's independence ballot in August 1999.

An estimated 250,000 East Timorese either fled or were forced across the border into Indonesian West Timor and held in camps as virtual hostages to the enduring passion of some Indonesians to reclaim East Timor territory.

Soares, a well known anti-independence figure with close links to the former Suharto regime, had promised parents their children would have a better life in Indonesia and several parents say they felt they had no choice but to relinquish their offspring. Several efforts to get the children back failed until Indonesia's Foreign Minister felt obliged to get involved.

A different kind of reunion also began yesterday with the return of about 900 refugees from camps in West Timor, to holding centres near Dili, in East Timor. This group included at least one notorious militia leader, and the parents of two others, and marks the first phase of a reconciliation process in which much time and effort has been invested.

On July 7, East Timor's president-in-waiting Mr Gusmao and other local leaders met militia heads such as Cancio Lopes Carvalho and his Mahidi militia to pledge safety and justice for them if they returned. Only when the militia leaders are brave enough to go home to East Timor will they allow their captive refugee groups to go home too.

A second and third phase of refugee returns is hoped to follow soon, which will eventually include the return of Cancio himself. He says he is ready to face justice and will declare everything that happened in the past periods of brutality inflicted by his and other militia groups. "He won't say who gave the orders for the terror until the right time comes," said a UN source involved in the reconciliation and return process.

The militias unleashed a wave of killing and destruction in the run-up to the 1999 independence ballot and in the weeks that followed until an Australian-led international peacekeeping force arrived.