Stephane Dujarric, the UN chief spokesman, said Eritrea has moved about 1,500 troops and 14 tanks into a buffer zone set up along its border with Ethiopia, and has also taken over a UN checkpoint.
Kofi Annan, the UN secretary-general, "urges the government of Eritrea to withdraw its troops from the zone immediately, and to cooperate with the United Nations in restoring the cease-fire arrangements," Dujarric said.
The move was a "major breach" of the 2000 accord ending the two-year conflict between Ethiopia and Eritrea that killed more than 70,000 people, he said.
UN peacekeepers set up the buffer zone in 2000 as part of the peace agreement and have been monitoring it ever since.
The agreement also required both countries to agree in advance to accept a new border between them as marked out by an international commission.
But the peace process ground to a halt after Ethiopia rejected the commission's border and insisted on further talks, prompting Eritrea to restrict peacekeepers' movements, including a ban on helicopter flights over its territory.
The UN peacekeeping force in Ethiopia and Eritrea now stands at 2,300 troops and military observers.
Due to the impasse, the Security Council last month threatened further cutbacks in the force unless the two countries made progress on their border.
The US launched a diplomatic initiative to revive the peace process earlier this year. But border commission meetings scheduled for June and August were cancelled after Eritrea refused to attend.