A group of Chinese fishermen who were intercepted while taking part in an illegal fishing operation have been handed over to Chinese diplomats, the Sri Lankan navy has said.
Chinese news agency Xinhua said earlier that the 37 men were under arrest.
But Sri Lanka, which enjoys warm ties with China, says they were never arrested and had been working as crew members on board two Sri Lankan boats.
The case has been seen as a test of the close ties between Beijing and Colombo.
A navy spokesman told the BBC Sinhala service that the fishermen, intercepted on Sunday off the east coast, were handed over to Chinese diplomats in the port of Trincomalee.
Earlier the Chinese embassy said it hoped their plight would be resolved quickly and "in accordance with the law".
The BBC's Charles Haviland, in Colombo, says that there are still questions about the status of the men, who were on board two trawlers along with two Sri Lankans who were arrested and then bailed.
"The fault is not with the [Chinese] crew. The case is against the [Sri Lankan] owner now," navy spokesman Kosala Warnakulasuriya told the Reuters news agency.
"We have handed over the Chinese crew to officials from the Chinese embassy."
Our correspondent says that they were apparently employed within Sri Lanka as crew members on board locally-owned boats chartered by a Sri Lankan company.
The Sri Lankan navy said that they were fishing on two trawlers 15 nautical miles off its east coast, clearly violating a 200-nautical mile limit.
Analysts say that Chinese fishermen - like those in Sunday's incident - are increasingly travelling further afield because of a lack of fish closer to home.
China is investing heavily in Sri Lankan ports, railways and power stations, while extending liberal amounts of credit.
Beijing has lent the country millions of dollars for infrastructure projects, including assistance for a sea port in the south at Hambantota.
Sri Lanka's government says that its growing ties with China are purely commercial. But some analysts speculate that Beijing is seeking a naval facility, a prospect that worries India.