Idriss Deby, Chad's president, accuses Sudan of backing the UFR, which is led by Timan Erdimi, a Chadian rebel who wants to seize Ndjamena, the capital of Chad.
Khartoum denies aiding the UFR, but Deby said on Saturday that the UFR's assault could lead to a break in relations between Ndjamena and Khartoum.
"The government must re-evaluate relations between Sudan and Chad and envisages, if the situation does not evolve positively, the rupture of these relations," he said.
"Sudanese cultural centres must be closed and schools financed by Sudan must be taken over by the Chadian government."
Deby has said in the wake of the UFR campaign that he is losing confidence in the African Union, and has called on it to censure Sudan for what he calls its backing of the group.
Adoum Younousmi, Chad's defence minister, said on Saturday that the UFR had been defeated and it would "take two or three years" for them to rebuild.
UFR 'not defeated'
Chad's government said 225 UFR fighters and 22 army soldiers were killed in two days of clashes on Thursday and Friday south of the main eastern city of Abeche.
But the UFR have rejected the Chadian government’s figures and say that their fight against Deby will continue.
"We are regrouping, we are taking care of the wounded, we are getting ready," a UFR source said.
"The situation is calm this morning, but you will see, it will pick up again … Ndjamena can say what they like but it isn't over. The figures given by the authorities are false."
A UN Security Council meeting in New York on Friday unanimously condemned the UFR campaign, which began soon after Ndjamena and Khartoum signed the latest in a series of peace accords.
The assault comes 15 months after opposition forces fought their way to the presidential palace in Ndjamena before being pushed back.