East Timor President Xanana Gusmao has pleaded with the country's police and army to work together following widespread unrest in the country.
Mr Gusmao urged all security forces to work together for peace
The dismissal in March of 600 army troops sparked off violence after they launched a rebellion.
Clashes between the rebel troops and police escalated last week, causing thousands to flee the capital, Dili.
On Thursday, the rebel troop leader called for the resignation of the PM whom the rebels blame for the sackings.
President Gusmao assumed direct control on Tuesday of the army and police, which are also split by internal disputes.
Ten police officers, whom the military suspected of aiding the rebels, were shot dead by troops last week.
On Thursday, Interior Minister Rogerio Lobato, who had been asked by the government to step down, formally announced his resignation, the Associated Press news agency reported.
"I bear moral and political responsibility for this incident," he said of the killings.
Visiting police officers at their headquarters, President Gusmao said the two forces needed to work together and with international peacekeepers to end the violence.
"I am proud of you because in difficult times like these you are still ready to wear your uniforms to serve this lovely nation," he told them.
Feb: More than 400 troops strike over pay and conditions
March: Government sacks nearly 600 of 1,400-man army
April: Rioting by sacked troops leaves five people dead
May: Violence intensifies, with battles between gangs from east and west of the country
24 May: Government asks foreign troops to take control
"Forgive each other, forget the past, let us build the nation from ashes once again," he said.
The rebel leader, Major Alfredo Reinado, has criticised Mr Gusmao, saying he had made a mistake by not sacking the Prime Minister, Mari Alkatiri.
He said the unrest would not stop until the prime minister stepped down.
"Alkatiri has to resign and go to court for all the crimes he ordered," Mr Reinado told AP.
Mr Alkatiri has also been blamed for the growing rivalry between people from the west and east of the country.
The soldiers, whose dismissal was ordered by Mr Alkatiri, were mainly from the west of the country, and had complained of discrimination against them by leaders from the east.
Although Dili was relatively calm on Wednesday, sporadic violence on Thursday led to the death of at least one person.
At least 20 people are reported to have been killed and tens of thousands have fled their homes since the violence began.
Some 2,000 foreign peacekeepers are in the country attempting to restore order.