The awarding of Badme to Eritrea has angered Ethiopia
The physical demarcation of the border between Ethiopia and Eritrea is to be indefinitely delayed.
The pegging out of the disputed 1,000 km border has already been postponed twice and was scheduled to start in October.
However, Ethiopia refused to cooperate after a Hague-based commission awarded the hotly-disputed village of Badme to Eritrea.
In recent months, Both sides have warned of the threat of renewed hostilities breaking out.
The Eritrea-Ethiopia Boundary Commission said in a statement
that: "Under the current circumstances the EEBC is unable to proceed with activities as envisaged ... but is ready and willing to proceed as soon as conditions permit."
The statement from the EEBC, which sits in The Hague, was released by the UN in Addis Ababa.
The BBC's Jonah Fisher in Asmara, says the statement confirms what had already been known for a number of weeks: That plans for the demarcation of the border are in big trouble.
The UN Security Council has already rejected a request from Ethiopia to set up a new commission to rule on the dispute.
Eritrea has repeatedly said that Ethiopia should accept the border commission's findings.
In September, Ethiopia in effect rejected the Boundary Commission's work when it called the awarding Badme to Eritrea "illegal", "unjust" and a recipe for future wars.
So far efforts from the UN Security Council and the international community have failed to convince Addis Ababa to abide by the Commission's ruling.
In Eritrea, there is growing frustration that the patient approach diplomats have adopted throughout this year have done nothing to prevent what the United Nations now calls "an impasse".
The two countries waged a bitter war between 1998 and 2000 over the issue - a conflict which cost up to 100,000 lives.