Palma was taken in a coordinated attack on March 24. Commander Chongo Vidigal, leader of military operations to regain control of Palma, told state television TVM the area was "safe."
Mozambique's military has said a "significant" number of militants were killed in fighting for the northern town and gas hub of Palma, seized by Daesh-linked militants last month.
Palma was taken in a coordinated attack on March 24, in a major escalation of an insurgency that has been raging in Cabo Delgado province for more than three years.
Thousands have fled the town of some 75,000 people and dozens killed, according to an early government toll, and French energy giant Total has abandoned a site where a multi-billion-dollar gas project is under way.
On Sunday, the army escorted officials and journalists through Palma.
Commander Chongo Vidigal, leader of military operations to regain control of Palma, told state television TVM the area was "safe," although he fell short of declaring the army had regained control.
"The airfield area was the only one we needed to clear and we did that this morning. It's completely safe," Vidigal assured.
"I think that it is a significant number of terrorists who were shot down," he said, adding the authorities would clarify the exact number later.
Footage broadcast by TVM showed soldiers hastily pulling black plastic sheets over a dead body on the street.
Crews on site filmed the blackened remains of several buildings, including banks, the town's hospital and the state prosecutor's office.
Heavily armed soldiers stood on the street as a few remaining residents slowly picked through debris.
Some collected bags of grain, while one man was shown trying to clear a destroyed stall.
Cabo Delgado's governor, Valygi Tualibo, painted a rosier picture, claiming Palma was back in government hands.
Visiting the town as part of Sunday's media visit, Tualibo told reporters he was "greatly satisfied" with what he saw.
"The situation is bleak, but we are excited," the governor said on TVM.
"Palma is under 100 percent control by Mozambican authorities."
Thousands of Mozambican troops had already been deployed to Cabo Delgado before the attack on Palma.
But the army's ability to fight the insurgency has long been questioned, with analysts pointing to poor training and lack of equipment.
Security forces have until now been bolstered by a South African private military company, Dyck Advisory Group (DAG), but its contract with the government ends this week.
DAG founder Lionel Dyck confirmed their involvement ended on April 6.
"God help the people," he told AFP via WhatsApp on Monday, adding that it was "unlikely" soldiers had retaken Palma.
Vidigal noted the Total gas plant, which the company abandoned on Friday, was secure.
"The facilities are safe, they are protected," he explained.
Total pulled out all its remaining staff on Friday, while the United Nations suspended civilian evacuation flights over security concerns.
More than 11,000 civilians are known to have fled Palma in recent days, according to the UN.