Erdogan said the original residents of Jarabulus and al-Rai have already begun to return from Turkey.
He said Turkey, which launched a military incursion into Syria just over two weeks ago, would seek no other objective around Manbij provided the YPG forces retreated east.
Three Turkish soldiers have been killed and one wounded during clashes with Islamic State fighters in northern Syria, according to Turkey's armed forces.
YPG fighters and its allies, with US backing, have seized chunks of territory from the jihadists.
As the Syrian Democratic Forces (SDF) took control of Manbij, a strategically important town controlled by ISIS until 12 August 2016, the apparent conflict between SDF and the US-lead global coalition backing them deterred any constructive movement on the ground.
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The Syrian Observatory for Human Rights conflict monitor had reported this was the case as had media close to the YPG itself, which claimed on Wednesday that the Turkish Army opened fire on civilians who tried to help wounded YPG fighters. The U.S. considers the YPG as its ally in the war against ISIS, and Washington had previously asked Ankara to collaborate with the group in its operations against ISIS.
Turkey fears that by advancing westwards from the Euphrates the Kurds would control unbroken tracts of borderland. "They are still present in the area", he said. The people who left came back. Even though both countries nominally oppose Islamic State and Syrian president Bashar al-Assad, the U.S. places a greater priority on defeating Islamic State.
"Our soldiers should get together and whatever needs to be done can be done", Erdogan said, adding that Turkey and the USA have been working in harmony so far in the operation against the Islamic State group.
Turkish Foreign Minister Mevlut Cavusoglu told a joint news conference with his Saudi counterpart on Thursday that Turkish forces would nonetheless continue "north to south".
Ankara has said it is happy to host the refugees but President Recep Tayyip Erdogan has repeatedly mooted creating a safe zone inside Syria to house them, possibly in a brand new city. The two men also discussed the importance of local forces being at the centre of any Raqqa operation.
