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The move came into effect at 12.01am.
Both sides have agreed to not anchor government vessels in the area.
Pireas was on its way to its next port of call at Tanjung Pelapas in Johor when it collided with Polaris, which was anchored.
"There are some issues but we are talking to each other," he said.
Singapore said there were five Malaysian government vessels in Singapore’s waters as of 6pm on Wednesday.
On the maritime front, the sides agreed to the establishment of a working group to discuss issues around port limits.
Khaw Boon Wan welcomes Malaysia’s move to de-escalate tensions as 2 ships leave Singapore waters, urges complete withdrawal
But one ship still remains in Singapore's waters as of Wednesday (Dec 12).
Observers say the presence of Malaysian ships is not helpful.
"We will not hesitate to take firm actions to protect Singapore's sovereignty and territory."
Singapore extends its own port limits and says it will act firmly if Malaysian vessels continue to intrude
"Malaysia has never laid claim to these waters, or protested our actions there. Now, out of the blue, Malaysia is claiming these territorial waters that belong to Singapore."