A statement issued by the commission said: "If, by the end of that period, the parties have not by themselves reached the necessary agreement and proceeded significantly to implement it ... the commission hereby determines that the boundary will automatically stand as demarcated by the boundary points" defined by the panel.
The commission's warning comes amid growing tension between the two countries, and fears of a war that could spill over into Somalia, threatening a wider regional conflict.
Both countries fought a border war which ended in December 2000, when they pledged that they would implement any frontier decision by the panel.
While Eritrea accepts the panel's current plan, Ethiopia rejects the boundary, and said the commission was acting outside its mandate.
"We too agree that dialogue is the best way, nevertheless ... we might be forced at some stage to respond with force."
Meles Zenawi, the Ethiopian prime minister
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Eritrea warned that the current stalemate was "not sustainable" and refused to rule out a new war with its historical foe in the Horn of Africa.
However, Asmara repeated denials that Somalia had become a proxy battleground for it and Addis Ababa amid reports the two countries are backing rival factions to settle scores from the 1998-2000 conflict.
Last year, Asmara restricted patrols by the UN Mission in Ethiopia and Eritrea (UNMEE) and expelled all of its North American and European staff, rebuffing UN Security Council demands to reverse the steps.
Since September, Eritrea has expelled five UNMEE staff for alleged espionage, and sent troops into a demilitarised buffer zone along the border in what the UN said was a "major breach" of the 2000 ceasefire.
Threats next door
Further to the border war with Eritrea, Somali Islamics have accusing Ethiopia of sending troops into Somalia to prop up Somalia's Addis Ababa-backed interim government.
Meles Zenawi, the Ethiopian prime minister, told a news conference on Saturday that he had explained Ethiopia's position to Western powers since the Islamists seized Mogadishu in June.
"Both Brussels and Washington appear to believe that any military response on our part might be counter-productive, saying that dialogue is the best way forward," he said.
"We too agree that dialogue is the best way, nevertheless as the direct victims of the aggression, we feel we might be forced at some stage to respond with force.
"It is our country that is being attacked. Naturally, we do not seek any light, green, red or yellow from anyone to protect ourselves.
"If, and when, we are convinced that all options of resolving the invasion through peaceful means are exhausted, only then we may act to respond in kind," he said.