Syria's military began pulling out of Daraa on Thursday, Syrian state television reported.
The move comes after six weeks of street battles between protesters and security forces that have rocked the southern town and spread to other cities. Last Friday, 54 people were killed, bringing the total number killed in the Syrian unrest to 542.
The official government line was that the pullout followed the army's successful completion of its mission to "restore security and calm."
But western diplomatic sources say officials close to Syrian President Bashar Al Assad are looking to negotiate with the opposition.
They say Bouthaina Shaaban, Assad's trusted media adviser, has been entrusted to explore ways of launching a dialogue aimed at ending street protests that threaten to topple Assad's regime.
But in view of the harsh crackdown on protests, rising death toll, and reports of thousands detained and missing, Shaaban has had poor luck in finding anyone in the opposition interested in talking.
The month and a half of street battles between protesters and security forces has embittered many in the opposition and hardened their stance.
"We say no to negotiations, at least until the secret police are gone from Syria. And when the secret police goes, then the regime will go as well," Rami Nakhle, an opposition activist in Beirut, told reporters.
An unnamed European ambassador in Damascus told reporters hard-line elements in Assad's regime seem to have the upper hand and have opted to suppress the protests by ratcheting up their use of force.
"There are some who want to talk to the opposition, but they keep telling us they have no one to talk to," the ambassador says.
A major obstacle faced by Shaaban is the opposition's lack of a credible, publicly visible figurehead or leadership council capable of uniting Syria's rococo, often divisive demographic tapestry.