Abdirahman Dinari, a Somali government spokesman, said: "We are grateful that they played an important role in the restoration of law and order in the country.
"They are pulling out gradually from all the regions they had entered, including the capital."
"The withdrawal of Ethiopian troops shows that the troops did not have any political agenda, but were only interested in stabilisation"
Hussein Mohamed Aidid, Somali deputy prime minister
Hussein Mohamed Aidid, the Somali deputy prime minister, who attended the send-off ceremony, praised the role of the Ethiopians whose intervention on behalf of the interim government prompted the Islamic courts fighters to flee Mogadishu on December 28.
"The heroic army of Ethiopia supported the transitional government to restore normality to the country after 16 years of violence ... I thank the people and the government of Ethiopia on behalf of my government," he said.
"The withdrawal of Ethiopian troops shows that the troops did not have any political agenda, but were only interested in stabilisation."
Somali troops, with crucial aid from neighbouring Ethiopia, drove the Islamic courts fighters out of the capital and much of southern Somalia in an offensive that began late last month.
But violence has been breaking out due to traditional clan rivalries and resentment among Somalis over the presence of Ethiopian forces.
Officials are concerned that a security vacuum might arise from the pullout.
Meles Zenawi, the Ethiopian prime minister, has been anxious to withdraw his forces and urged other countries to contribute to a peacekeeping mission.
"Peace is possible if the interests of US and the Ethiopians are removed"
Ahmed, Bossaso, Somalia
Send us your views
Only Uganda and Malawi have committed troops to the AU peacekeeping force in Somalia.
The AU force was meant to be in place at the end of of January, but military analysts say countries are sceptical about sending forces while there is still fighting on the ground.