Ethiopian troops entered Somalia in 2006 to help the weak interim Somali government to oust the Islamic Courts Union (ICU), which had taken control of most of the country.
Ethiopian forces were still operating in Mogadishu on Friday. Two soldiers were killed in a explosion in the capital and, as they opened retaliatory fire, seven civilians were shot dead, witnesses said.
Unless more peacekeepers are sent quickly to strengthen the existing African Union (AU) force of 3,200 troops in Somalia, analysts say Ethiopia's pull-out of their estimated 3,000 troops might have dire effects on the security situation in the country.
AU forces have already started taking up military positions left vacant by Ethiopian forces, who have scaled back their presence across the country in recent months.
AU officials said about 2,500 soliders from Uganda, Burundi and Nigeria are ready to be deployed, but have been hindered by financial and logistical obstacles.
The political situation in Somalia is in turmoil after the president sacked the government and later resigned.