Troops loyal to President Ahmad Tejan Kabbah had seized the town on 29 May, but withdrew two days later when they ran out of ammunition in the face of a sustained rebel attack.
Lunsar is the first rebel town to fall to the government. It is on the road to the rebel stronghold of Makeni and the diamond fields further east.
Its recapture came as UK Foreign Secretary Robin Cook arrived in the country, flying in to Lungi airport before being taken to a waiting Royal Navy ship offshore.
He is due to meet President Kabbah and other government leaders on Thursday morning, as well as pro-government militia leaders including Johnny Paul Koroma.
Freetown gunfire
Shooting was reported in the capital, Freetown, on Wednesday evening, near Mr Koroma's house.
The BBC's Mark Doyle says there appears to have been a clash between two factions of the former army. There were no reports of casualties.
Indian United Nations forces and members of the new Sierra Leonean army and armed police were reported to be at the scene.
Prisoners
Government soldiers confirmed that they had taken control of Lunsar at around 1400GMT on Wednesday.
As they returned to Rogberi Junction, 18km (12 miles) from Lunsar, they brought six elderly men and a young fighter as prisoners.
"He has confessed. He is a rebel," said an army officer, referring to the youth.
"He has been with the RUF for more than a year."
The six older men denied any connection with the RUF and satisfied the soldiers that they were local residents.
At least one government soldier sustained injuries as Lunsar was retaken.
Protests
A mass petition has been organised to coincide with Mr Cook's visit appealing to the UK Government to keep British troops in the country.
The activists say the petition, addressed to UK Prime Minister Tony Blair, will be signed by one million people.
British troops intervened in the Sierra Leone war in May, providing vital logistical supplies and advice to the government, but are now planning to pull out in mid-June.
Mr Cook will hold meetings with the head of the UN mission in Sierra Leone and the UN military commander during his stay.