A government minister, Ralph Regenvanu, said the decision was made by cabinet this morning.
The volcano at the island's centre, which has been erupting in fits and bursts since September, has increased its activity in recent days.
On Thursday, reports from the island indicated that ash fall was so severe the sun was blocked.
Hundreds of Ambaeans have already opted to leave voluntarily, most of them to Vanuatu's large, north island of Espiritu Santo.
A government MP from Abae, Jacob Mata, said he understood that that those people who wanted to stay on Ambae would be able to do so.
The government has given a period of two months, which began yesterday, for the evacuation of what is expected to be most of Ambae's population.
It's understood that around eight thousand people could still be on Ambae.
The resettlement is considered temporary, at least until authorities can gauge the ongoing activity of the Manaro volcano.
Mr Mata said the government planned for Ambae evacuees to move to Maewo, which itself has been impacted by ashfall.
But he said in his view they should be moved to Santo where a lot of Ambae people have gone already because there were more resources available for their living needs.
He said the government indicated if Ambae people wanted to move to Santo, which is further away than Maewo, it would be at their own expense.