Tens of thousands of pre-war residents have been unable to return to the large Palestinian refugee camp in the south of the capital since regime forces ousted the Islamic State group in May.
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On Tuesday, deputy foreign minister Faisal al-Meqdad said Damascus had created a "plan for the return of all refugees to the camp", though he did not give a date.
The UN agency for Palestinians refugees, UNRWA, on Wednesday applauded the decision.
"UNRWA welcomes the decision by the Syrian government to allow Palestine refugees to return to their homes in Yarmuk camp," spokesman Chris Gunness said.
Some 160,000 Palestinians lived in Yarmuk before the start of Syria's seven-year conflict.
After years of devastating fighting, siege and bombardment, much of the district has been reduced to a sea of grey rubble and mangled steel, though main roads have been cleared of debris.
Only a few dozen families now live amid its bombed-out buildings.
UNRWA has 23 premises there including 16 schools, all of which have been damaged.
It has faced a funding crisis since August when the United States, its largest single donor, announced it would end its US$350 million a year funding.
"We call on the international community to provide support for UNRWA to allow the agency to provide core services, including health services and education, to Palestine refugees who return to Yarmuk," Gunness said.
"The camp is largely destroyed and there is a need for the municipality to restore basic infrastructure, including water, electricity and sewage," he said.
Set up in 1957 after the creation of the state of Israel, Yarmuk evolved from a camp of tents into a bustling neighbourhood that was home to Syrians as well as Palestinian refugees.
"Yarmuk was home to almost 30 percent of the Palestine refugee population in Syria before they were displaced," Gunness said.
Many of Yarmuk's residents fled after rebels overran the neighbourhood in 2012, leaving those who remained to face severe food shortages under a years-long regime siege, and then jihadists.
The Palestinian Liberation Organization has funded rubble clearing, but rebuilding awaits a green light from Damascus.
Syria's war has killed more than 360,000 people and displaced millions more since starting in 2011.
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