Fernando Cano, the Michoacan state deputy government secretary, told AFP yesterday that the self-defence forces entered Apatzingan and that "they will be in charge of security" along with federal police.
The civilians were unarmed and they were all members of new "rural defence" forces that were recently formed under the army's oversight to legalise the vigilante movement, he said.
Vigilante leader Estanislao Beltran said that hundreds of his colleagues manned checkpoints outside the city to "check who goes in and out."
Fed up with the local police's failure to curb the cartel's reign of violence and extortion, civilians began to form vigilante units a year ago in Michoacan's lush lime and avocado growing region.
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The movement has grown since then, posing the biggest security challenge of President Enrique Pena Nieto's administration.
The vigilantes have had their sights set on Apatzingan for months, saying it was the urban headquarters of the Knights Templar and a vital trade centre for their lime and avocados.
In late January, the federal government decided to legalise the movement. Around 600 have signed up so far out of an estimated 20,000 vigilantes.