In an accusation backed by some security experts and diplomats, Somalia's government said earlier this month that Eritrea continues to support al Shabab fighters with AK-47 assault rifles, rocket-propelled grenades and other weapons.
Eritrea rejects the accusations that it sends weapons to the al Qaeda-linked groups fighting Somalia's government.
Araya Desta, Eritrea's UN ambassador, said: "We have never done this - it is totally false and misleading."
Desta said Eritrea had never given financial or military support to opposition factions in Somalia.
"The historical relationship that exists between Eritrea and Somalia is still intact, we fully respect them and we anticipate peace and stability in the country - that is our goal," he said.
Clashes between al Shabab fighters - who admit to having foreigners in their ranks - and pro-government fighters have killed at least 139 people and sent around 27,000 people fleeing the seaside capital of Mogadishu since late last week.
The Security Council expressed "concern at the loss of life and the worsening humanitarian situation arising out of the renewed fighting."
Somalia's 18 years of anarchy has left millions displaced, killed tens of thousands and created one of the world's worst aid crises.
Attacks on relief workers, extortion and regular clashes have hampered groups trying to work there.
Aid organisations warned on Thursday that Somalia's worst fighting in months was aggravating an already dire humanitarian emergency.
Large parts of Somalia's south and centre are under the control of al Shabab and allied fighters.
The UN Security Council has long been under pressure from African states to send a UN force to Somalia, but repeatedly delayed deciding.
It is due to consider the matter again by June 1.
Ban Ki-moon, the UN secretary-general, recommended in a report to the Security Council last month that the best approach would be to step up support for African Union peacekeepers already in Somalia, Amisom, and for Somali security forces.
Indonesia has said it would be willing to lead and provide troops for an eventual UN peacekeeping mission in Somalia.
Ban has cautioned that sending UN blue helmets to Somalia any time soon would be a high-risk move that would likely prompt attacks against the peacekeepers.
Sharif Ahmed was sworn in as Somalia's president in January, promising to forge peace with east African neighbours, tackle rampant piracy offshore and rein in anti-government fighter groups.