Major-General Peter Cosgrove, commander of the peace-keeping force, said the provincial capital, Dili, was not yet secure. In the Baucau operation, Australian Black Hawk helicopters flew 150 troops into the northern coastal city.
It was the first big advance outside Dili since the UN-backed peace-keepers arrived on Monday. Baucau has a larger airport than Dili, which will eventually allow the force to speed up its deployment into East Timor.
Eurico Gutteres, commander of Aitarak, one of the most notorious anti- independence militia, was quoted by Indonesia's official news agency as saying East Timor might be plunged into a civil war.
Thousands of people have been displaced and whole towns destroyed since the militias, backed by Indonesian troops, went on the rampage after the territory voted in favour of independence last month.
Maj-Gen Cosgrove said the pro-Jakarta militants may be stepping up their attacks because refugees, who have been in hiding, are returning to Dili. People flooded back from the mountains on Tuesday, after the peace-keepers moved in.
Maj-Gen Cosgrove said: "I think there's ample evidence that many people who fled the city in the really bad days after the election are now returning. In consequence, it would appear that the militia has attempted to step up some activity as a show that all is not yet secure." He said the situation was particularly dangerous because of the random nature of the attacks.
Returning refugees have ransacked government-run warehouses in Dili, carrying away sacks of rice and sugar, and barrels of cooking oil. They said they could not wait for international aid to arrive. Australian peace- keeping forces managed to regain control of the warehouses, but only after most of the food had gone.
The international charity, Medicins Sans Frontieres, has criticised the military for not allowing more humanitarian relief into East Timor. Thousands of refugees remain in hiding in forests and mountains. Refugees sheltering in the mountain town of Dare say about 20 people there have died from malnutrition.
The UN spokesman, David Wimhurst, said food air-drops had been delayed for a second day as military aircraft poured into the airport. Nearly half the 7,500-strong force had arrived by yesterday, with Dili port, the airport and the UN headquarters secured. Several warships had also arrived.
The Indonesian Security Minister, Feisal Tanjung, said President B J Habibie would soon lift martial law in East Timor, and hand over responsibility for security in the territory to Interfet. An Australian military spokesman said Indonesian soldiers were expected to withdraw completely from the territory by Sunday.
Meanwhile, the East Timorese pro-independence leader, Jose Ramos Horta, said he had urged the Indonesian Foreign Minister, Ali Alatas, to protect the thousands of East Timorese refugees in West Timor, which remains under Indonesian control.
"We know that power in Indonesia does not lie with the foreign minister, but it is to him that we can address our concerns," Mr Ramos Horta told the Portuguese radio station TSF.
His remarks came after the UN High Commissioner for Refugees, Sadako Ogata, expressed concern over reports of intimidation of East Timor refugees by Indonesian forces in West Timor.Reuse content