The monks in the island nation’s central town of Dambulla protested against the mosque on Friday, stopping the Islamic prayers, and threatened violence if it was not removed.
They also have asked that a Hindu temple in the area be removed.
“Following a discussion with the relevant parties, the Prime Minister has ordered the disputed mosque moved to a suitable location as soon as possible,” Sisira Wijesinghe, media secretary to Prime Minister D.M. Jayaratne, told Reuters.
He said several Muslim ministers took part in the discussion, a claim rejected by Muslim political leaders.
“It is a false statement and there was no discussion on this and we don’t agree with the mosque relocation,” A.H.M. Fowzie, a senior Muslim cabinet minister, told Reuters.
Muslims living in the area told Reuters that the mosque has existed since 1962 and regular prayers have been conducted for the past three decades.
Buddhist monks, however, said the government mistakenly had allowed the mosque to be expanded recently, despite a 1982 state regulation declaring the area sacred for Buddhism.
Constitutionally, Buddhism is the main religion in Sri Lanka, ahead of Hinduism, Islam, and Christianity, and the Buddhists make up around 70 percent of the population.
Analysts say successive governments have been under pressure to give in to the majority whenever there is an ethnic clash.