This verse concludes the list of those who had returned to Judah from Babylonia. Compare the parallel passages of Ezra 2.20 and Neh 7.73.

The priests, the Levites, and some of the people settled in Jerusalem and its vicinity: Some of the people refers to lay people, those who were not priests or Levites. Its vicinity refers to the area near the city of Jerusalem.

And the temple singers, the gatekeepers, and all Israel in their towns: For the temple singers and the gatekeepers, see the comments on 1 Esd 1.15-16 (see also verses 27-28). All Israel means “the rest of the Israelites” (Good News Bible). Their towns presumably refers to the hometowns from which their ancestors had come at the time of their captivity. And presumably the musicians and gatekeepers lived in towns near Jerusalem since they had duties in the Temple. But these towns would have been the towns from which their ancestors had come. However, we do not see in the Greek text the distinction Good News Bible makes between “the musicians and the Temple guards” and “the rest of the Israelites” as far as where they settled is concerned. An alternative model of this verse based on Contemporary English Version is:

• The priests and Levites and some of the other Israelites settled in Jerusalem and the surrounding villages. The rest of the people, including the Temple singers and gatekeepers, settled in the towns from which their ancestors had come.

Quoted with permission from Bullard, Roger A. and Hatton, Howard A. A Handbook on 1-2 Esdras. (UBS Helps for Translators). Miami: UBS, 2019. For this and other handbooks for translators see here.