Eritrean President Isaias Afewerki has rebuffed an Ethiopian proposal to resolve a border dispute between the two countries.
Dusty Badme was at the centre of the border dispute
In his first public reaction, he said it was a move "that would drag the peace process another step backwards".
Last month, Ethiopia's leader Meles Zenawi said for the first time he accepted "in principle" the ruling of the independent boundary commission.
But Mr Afewerki said the remarks contained no new developments.
Mr Meles told MPs he still thought the two-year old ruling, which defined the countries' shared border, was illegal and unjust.
But he said he wanted to send an envoy to discuss the issue.
Tens of thousands of people were killed when Eritrea and Ethiopia fought a two-year border war which began in 1998.
Ethiopia previously rejected the border drawn up by an international commission saying it could cause future conflict.
Disagreements have centred on the town of Badme, which was awarded to Eritrea.
Ethiopia's rejection of the boundary commission's decision left the peace process in limbo, as UN peacekeepers were unable to physically map out the border.
The war began when Eritrean troops invaded Badme, which was under Ethiopian administration.