East Timor's capital was reported to be calm but tense on Friday as foreign troops arrived to quell clashes between local security forces and ex-soldiers.
Local East Timorese welcomed the Australians' arrival
A BBC correspondent, Phil Mercer, says people are slowly starting to return to the capital Dili as the arrival of Australian troops takes effect.
But gunfire rang out from the outskirts of the city on Friday and the exodus of foreign embassy staff continues.
Australia, Portugal, Malaysia and New Zealand have agreed to send troops.
Nine people died in one incident on Thursday, when unarmed policemen, whom the East Timorese military suspected of aiding the rebels, were shot dead by troops.
Australia has experience of providing military aid to East Timor as it led a UN-sponsored force into the country in 1999 to end the unrest sparked when the population voted for independence from Indonesia.
Late on Thursday the UN Security Council backed the deployment of foreign troops in East Timor, only a year after UN peacekeepers left.
Police HQ bloodshed
Eyewitnesses reported the sound of heavy machine-gun fire and mortars from the hills surrounding Dili on Friday morning.
Others told the Australian press of long bursts of automatic weapons fire near the police headquarters, the scene of Thursday's main bloodshed.
"As the unarmed police were being escorted out, army soldiers opened fire on them, killing nine and wounding 27 others," UN spokesman Stephane Dujarric told the Associated Press.
Despite the unrest, Australia Defence Minister Brendan Nelson insisted that the first wave of Australian troops had already improved the situation.
"With the 220 or so soldiers we already have on the ground, a significant degree of stability has come to East Timor and Dili overnight," he told Australian radio on Friday.
"Over the next 24 to 48 hours you will see the remainder of the 1,300 troops being deployed roll out," he said.
A smaller Malaysian force has also begun to arrive to help the situation.
The foreign forces are due to move into key sites in the capital in the next few days, to try to separate the fighting factions, according to East Timor's Foreign Minister Jose Ramos-Horta.
He added that the East Timorese troops would move back to their barracks on the outskirts of the city.
The unrest began in March, when nearly 600 of the army's original force of 1,400 went on strike for better working conditions. They were subsequently sacked.
The violence escalated and five people were killed in clashes in April, and tens of thousands fled Dili fearing further unrest.