International Security Assistance Force commander General David Richards said the move from Musa Qala district in Helmand province was a "redeployment", stressing there had been no negotiations with the Taliban.
The troops left the main town in the district, which has seen intense fighting this year in which at least four British troops were killed, at the request of tribal elders and officials who said they could keep the peace.
It was the first time the NATO force had moved out of a district following a deal with locals, and could prove to be a model for peace in others, an alliance spokesman said.
"It's a redeployment," Richards told reporters in Kabul.
"The security of Musa Qala itself, the town, is now OK so we don't need to stay there anymore. We can use them (the soldiers) in other ways," the British general said.
The shift involved about 120 troops, another ISAF official said.
The number of attacks in Musa Qala plummeted last month after tribal elders worried about the destruction told British forces they would use their influence to calm the situation, ISAF said two weeks ago.
Helmand governor Mohammad Daud told AFP the district leadership had also been reshuffled at the request of the elders. He rejected a reported statement by the rebels that the Afghan flag would no longer fly above Musa Qala.
"The Afghan flag is there, our new district chief, our new police chief with police are there," Daud said. "There is not any kind of agreement (with the Taliban). This was the demand of tribal elders."
ISAF officials say the Musa Qala deal is different to one struck in Pakistan last month between Islamabad and tribal elders, in that all negotiations in Helmand were only with tribal authorities, most of whom are pro-government.
The force says it does not negotiate with the Taliban.
President Pervez Musharraf however said last week that Richards, while visiting Islamabad, had approved of its peace deal in the unstable North Waziristan tribal area and wanted help to do the same thing in Afghanistan.
The 37-nation ISAF wants to extend government authority across Afghanistan so that reconstruction can pick up, hopefully persuading fence-sitting Afghans to throw their lot in with the government and reject the Taliban.
Musa Qala may be a model for other parts of the nation, NATO civilian representative Mark Laity said.
"Tribal elders are important people in the community. If they can help bring a more peaceful atmosphere, then that is certainly the way we would like to go. But everywhere is different," he told AFP.
Afghan army chief of staff General Besmullah Khan told reporters that extra police had been sent to the district and military forces could be sent there if necessary.
And the interior ministry said Musa Qala was among scores of districts where the understaffed police force would be supplemented by "auxiliary police".
"The tribal elders have promised the government they would maintain their own security by sending their sons to the police forces," spokesman Zemarai Bashary said.
There have been concerns the auxiliary police plan could amount to rearming militias in contravention of a disarmament process that has been underway for years. But officials have insisted the force would be wholly under government authority.
Helmand, where most of the 5,000 British troops in the country are based, produces by far the most of Afghanistan's illegal opium, which makes up the bulk of the world supply.
It has seen some of the worst of the insurgency launched after the 1996-2001 Taliban regime was ousted by a US-led coalition for sheltering al Qaeda.

Copyright AFP (Agence France-Presse), 2006