Sri Lanka and India on Wednesday agreed to release the fishermen held in each other's custody after a high-level discussion between the two sides here following the killing of an Indian fisherman, a top government source said.

Lanka would release 85 Indian fishermen, the source said, adding that India would free at least 19 Lankan fishermen.

"This move is being made to defuse the current tensions," the source added.

It was a reference to the current controversy where the Sri Lankan Navy has been accused of opening fire on Indian fishermen and killing one of them.

The Lankan navy, however, denied the allegation, saying it does not open fire at poaching fishermen and only arrests them.

Sri Lanka has said it ordered an investigation into the incident and wanted to ensure that such incidents would not hamper the good relations between the two countries.

Fisheries Minister Mahinda Amaraweera said he had spoken with Indian High Commissioner Taranjit Singh Sandhu on the situation.