The talks are being held amid clashes between the Ethiopia-backed Somali forces and Muslim fighters that have killed at least 6,000 civilians over the past year, according to rights groups and aid agencies.
"We have to agree that this issue of the Ethiopian occupation of Somalia will be genuinely adressed," Abdirahman Abdishakur Warsame, deputy chair of the Asmara-based Alliance for the Re-liberation of Somalia (ARS), one of the main opposition groups, said.
The UN presence in Somalia was prompted by calls to stabilise the country after civil conflict in 1991.
Mohamed Siad Barre, the former president, was ousted in a coup motivated by tribal and political grievances
1992: UN intervenes when Mohamed Farah Aidid and Ali Mahdi Mohamed, the two main architects of Barre's ousting, fail to agree on a government.
They are accused of using food as leverage, leaving nearly 1.5m Somalis to starve.
Deteriorating situation prompts George Bush Snr, former US president, to approve deployment of soldiers with UN force
1993: Twenty-four Pakistani peacekeepers killed by fighters loyal to Aidid.
Eighteen US marines killed in uprising led by tribal leaders - Black Hawk army helicopter shot down by fighters
1994: Bill Clinton, former president, removes remaining military forces
1995: Operation United Shield, code name for the UN peacekeeping mission, ends as troops finish withdrawing from Somalia amid war
After UN withdrawal, the organisation sets up UNPOS - the UN Political Office for Somalia, to "advance the cause of peace and reconciliation"
2008: Fourteen years later, the UN sponsors latest push for peace at Djibouti summit
"At least we want to get a timetable for an Ethiopian withdrawal, then we can sit face to face" with the government."
But Yusuf insisted that the Ethiopian troops that came to his its rescue in 2006 should not leave before a UN peace mission is deployed.
"The eventual withdrawal of the Ethiopian troops from Somalia is contingent on the deployment of the United Nations peacemaking force and the cessation of hostilities," he said.
"I would like to state very clearly that there should not be a security vacuum in Somalia."
Alejandro Wolff, the deputy US ambassador to the UN, was equally cautious about the prospect of an Ethiopian withdrawal.
"We don't want to see Ethiopians leaving if there is no alternative. They are the ones today securing part of the country even if their presence is seen as controversial," he said.
Yusuf escaped unhurt when a mortar exploded on Sunday near his aircraft just after he boarded it in Mogadishu, the Somali capital, to head for Djibouti.
Ahmed Abdisalan Adan, Somalia's deputy prime minister, said government and ARS representatives had been meeting on the sidelines of the peace conference.
"During the last two days, we met informally. We are no strangers to each other. We do believe they have come here for peace," he said.
He also said that the government had decided to freeze its operations against the Muslim fighters in Somalia in a bid to create a conducive atmosphere for a broad dialogue in Djibouti.
"We have decided to stop all operations in Somalia to avoid civilian casualties," he said.
Separately, the Security Council ambassadors announced an agreement had been reached on the text of a resolution to combat piracy off the coast of Somalia.
The diplomats arrived in Djibouti on Monday on the first leg of their 10-day tour of Africa's trouble spots.