Military manoeuvres on both sides of an unmarked 1000km (620 mile) frontier between the feuding Horn of Africa neighbours have raised international concern about a possible repeat of their 1998-2000 border war that killed 70,000 people.
The growing tension along the border coincided with deadly protests in Ethiopia over a 15 May election that the opposition says was rigged, but which Prime Minister Meles Zenawi's government says was fair.
The Ethiopian authorities have accused Eritrea of supporting the biggest opposition party, the Coalition for Unity and Democracy, whose leaders face treason charges and are accused of inciting the violence in which more than 40 people died.
In an interview with local media late on Saturday, Eritrean President Isaias Afewerki dismissed the Ethiopian claims as a "baseless allegation", the Information Ministry said.
"President Isaias Afewerki underlined that statements about the resumption of imminent war between Eritrea and Ethiopia are the invention of the TPLF and its collaborators designed to divert [attention from] the prevailing internal crisis in Ethiopia," it said.
Afewerki accused Ethiopia of
using the border dispute
The ministry was referring to Meles' former rebel movement, the Tigrayan People's Liberation Front.
Isaias said: "In a bid to escape from the current internal crisis it is facing, the TPLF regime is resorting to war as an alternative."
Ethiopian officials were not immediately available for comment.
Eritrea has grown frustrated at the international community's failure to pressure Ethiopia to implement a border ruling by an independent commission.
Under a 2000 peace deal, both sides agreed to accept the commission's decision about the location of the frontier as final. But when the commission in 2002 awarded the flashpoint town of Badme to Eritrea, Addis Ababa rejected the ruling.
The Eritrean statement, on the website www.shabait.com, warned that the country's patience over the border issue was running out.
Ethiopia and Eritrea have said they will not be provoked by the other side into starting a new war. Military leaders from both sides are expected in Kenya this week to discuss border tensions and troop movements.