Eritrea is expelling Canadian, Russian, European and United States peacekeepers from the United Nations mission monitoring the border with Ethiopia.
Both sides have reinforced their border military positions recently
The decision makes UN observation of the tense border almost impossible, says the BBC's Ed Harris in Asmara.
In a letter to the UN mission, the Eritrean government gave staff of those nationalities 10 days to leave.
Relations between Ethiopia and Eritrea are poor and there are fears of a new war over their disputed border.
The UN Security Council and UN chief Kofi Annan have demanded that Eritrea immediately reverse its "unacceptable" decision to expel the peacekeepers.
"The United Nations cannot accede to Eritrea's request and demands that the government immediately and unequivocally rescind its decision without preconditions," Mr Annan said in a statement.
The Ethiopian government criticised Eritrea's move as unhelpful.
"Eritrea's action is not appropriate, it won't help anyone," Information Minister Berhane Hailu told AFP news agency.
The two states went to war in 1998. A peace deal in 2000 led to a border ruling by an independent commission.
There are some 3,300 peacekeepers and military observers from some 40 countries, 191 civilians and 74 UN volunteers working at the mission.
UN troops, including some 1,500 from India, patrol a 900km long buffer zone which is just 25km wide and falls on the Eritrean side of the old border.
There has been no explanation for Eritrea's decision to expel the peacekeepers or why the personnel from specific countries have been singled out.
Reports suggest at least 150 staff may be affected - mainly observers and civilian staff.
Ethiopia has not yet withdrawn its forces from the town of Badme, which was awarded to Eritrea.
June 2000: Peace agreement
Apr 2002: Border ruling
Mar 2003: Ethiopian complaint over Badme rejected
Sep 2003: Ethiopia asks for new ruling
Feb 2005: UN concern at military build-up
Oct 2005: Eritrea restricts peacekeepers' activities
Nov 2005: UN sanctions threat if no compliance with 2000 deal
Frustrated with the stalemate, Eritrea has imposed restrictions on the activities of the UN peacekeeping force patrolling the border buffer zone in the past few months.
Both sides have reinforced their military positions.
"Members of Unmee with nationalities from USA, Canada and Europe, including the Russian Federation are requested to the leave the country within 10 days of this notice," said the letter sent to the UN Mission in Ethiopia and Eritrea (Unmee), according to AFP.
"This notice comprises all those with the above nationalities irrespective of (the) sector they are working in," said the letter, which was signed by Colonel Zecarias Ogbagaber, Eritrea's liaison officer with the UN mission.