The United Nations peacekeeping mission to Ethiopia and Eritrea has said it is concerned by the state of the peace process between the two countries.
Dusty Badme was at the centre of the bloody border war
This follows Ethiopia's opposition to a border commission ruling which confirmed that the hugely symbolic village of Badme belongs to Eritrea.
Eritrea has warned of "grave consequences" if Ethiopia rejects the ruling.
The two countries fought a bloody two-and-a-half-year border war, starting in May 1998 when Eritrean troops moved in to Badme.
"We are concerned, and as a result we will increase our efforts to ensure that the peace process continues and progresses," said Gail Bindley Taylor Sainte of the UN's Mission in Ethiopia and Eritrea (Unmee).
But UN Force Commander Major-General Robert Gordon said that neither side was "violating or preparing to violate" the peace deal, according to the United Nations' Irin news service.
The long-awaited physical demarcation of the border is scheduled to take place later this year, but requires the co-operation of both nations.
Eritrean Government spokesman Yemane Ghebremeskel said by rejecting the commission's latest report, Ethiopia was violating the sanctity of colonial boundaries which was a fundamental principle in Africa.
Thousands were killed during the war
Although Ethiopia has expressed its regrets over the Badme ruling, it has not openly rejected it.
"I would expect that there would be measures from the United Nations Security Council, from the OAU or the African Union to persuade Ethiopia to abide by the Commission's decisions, Mr Ghebremeskel told the BBC's Jonah Fisher in Asmara.
"But if Ethiopia does not do that (comply), there will be consequences. I do not want to speculate on that now but that decision will be extremely grave and a very dangerous decision."
The bitter war formally ended with the signing of the Algiers peace agreement in December 2000.
The agreement established the boundary commission to decide once and for all where the border lies, and both countries promised to abide by the decision.
But Ethiopia said that the boundary commission did not stick to its mandate as defined in Algiers, and hopes that now it will rectify its mistakes.
The BBC's correspondent in Addis Ababa Damian Zane says it is hard to see what would lead the government into accepting that Badme is part of Eritrea.
He added that it would be a bitter pill for the government to swallow and the government has also said the people will not accept it.
But the diplomatic community is currently considering several options as a way out of the impasse.
The commission has also said it is willing to look at the decision again if both Eritrea and Ethiopia see it as a way forward.
The boundary commission judgement's was based on treaties, maps and historical reality.
Ethiopia had, before the war, administered the Badme but Eritrea invaded it, claiming the village as part of its territory.
Thousands lost their lives and hundreds of thousands more from both sides were displaced.