Human rights groups and the United Nations have criticised the Manus Island detention complex, one of two South Pacific island asylum-seeker centers funded by Australia, for cramped conditions, inadequate medical facilities and violence.
At a meeting, Papua New Guinea immigration officials told refugees that an area of the Manus camp would close on May 28, with the rest of the compound to shut on June 30.
An unspecified number of asylum-seekers will be relocated to a transit center, one refugee quoted the officials as having said.
"Immigration is telling people that their plan is to remove those people who were interviewed for America to East Lorengau camp, which is close to Lorengau town," said Behrouz Boochani, a Kurdish Iranian detained on Manus for nearly four years, referring to the island's major town.
Papua New Guinea officials could not immediately be reached for comment.
The move to close the center also increases pressure on those whose applications for asylum have been rejected.
Asylum seekers said the move was creating panic and signaled Papua New Guinea's readiness to deport those who had so far rejected Australia's financial offer to return home voluntarily.
Papua New Guinea's Supreme Court ruled in 2016 that the camp was illegal and should close, forcing Australia to confirm it would shut the facility by the end of 2017.
Australia struck a deal with former US President Barack Obama to take some detainees who were deemed refugees, a pact President Donald Trump characterized as a "dumb deal" when he took office in January.
Watch: Trapped in paradise - Manus refugees 'denied work, travel rights'
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