Mario Monti's caretaker government on Thursday reversed a March 11 decision not to send the marines back from a home visit after Rome secured a promise from New Delhi that the two would not face the death penalty if convicted, officials said.
The marines, part of a military security team protecting a tanker from piracy, are accused of shooting two fishermen off the coast of Kerala in February 2012.
They say they fired warning shots at a fishing boat believing it to be a pirate vessel.
The sailors, Salvatore Girone and Massimiliano Latorre, arrived back in India on Friday aboard an Italian air force plane, Indian media reported.
India and Italy have been embroiled in an escalating row over the marines, who had been allowed home to vote in the Italian elections in February on condition they returned to India by Friday.
Michele Emiliano, the mayor of Girone's hometown of Bari, said he had been comforting the marine's "despairing" family.
"A hypocritical government is trying to end its embarrassment by sending the sailors back to India after exhibiting them as 'free' during the election campaign," Emiliano wrote on Twitter.
Foreign Minister Terzi defended the move in an interview with la Repubblica daily on Friday, rejecting calls from centre-right politicians for him to quit.
"I don't see a reason to" resign, he said, adding that the temporary stand-off with India had helped Italy ensure the marines would be treated well.
India's Supreme Court ruled in January that India had jurisdiction to try the marines. But Italy had challenged that decision, arguing that the shooting took place in international waters and that the two should face any trial at home.
Indian politicians welcomed Rome's decision. "We are happy with the outcome which is consistent with the dignity of Indian judicial process," Prime Minister Manmohan Singh told reporters.
Italy's initial plan to not send the marines back had exposed Singh's fragile coalition, which governs with a minority in parliament, to opposition attacks that it was too soft and had even colluded with Italy to allow the marines to leave the country.
The government had demanded Italy return the sailors or face a possible rupture in ties.
India's chief justice went so far as to bar Italy's ambassador from leaving the country, but behind the scenes, Italian and Indian officials were trying to resolve the dispute.
"There have been very intensive diplomatic contacts between Italy and India during the last 24 hours," said Indian foreign ministry spokesman Syed Akbaruddin.
Details of the negotiations have not been disclosed but Akbaruddin told Reuters that India and Italy had an agreement under which convicted prisoners could serve jail time in their home countries.
Foreign Minister Salman Khurshid said in parliament that India had assured Italy that the marines would not face the death penalty, which only applied in the "rarest of rare cases".
"Italy falls into line," crowed one Indian television cable news channel, while cabinet minister Manish Tewari said Rome's decision to return the sailors showed that India's "gravitas is being recognised across the world".