Somalia's three top leaders have flown to Sudan, for peace talks with the Islamic group which controls Mogadishu.
President Yusuf says the Islamists must recognise his government
President Abdullahi Yusuf left Kenya, along with the prime minister and the speaker of parliament, despite earlier insisting on conditions for talks.
A team from the Union of Islamic Courts is also on its way for the talks, following their seizure of the capital from an alliance of warlords.
Diplomats say there is a window of opportunity to bring peace to Somalia.
The country has not had an effective national government for 15 years.
Members of the interim government, including Prime Minister Ali Mohammed Ghedi at first welcomed the Islamist group's victory in Mogadishu.
But tensions have since risen over the issue of whether Somalia needs foreign peacekeepers.
Over the weekend, the possibility of conflict came closer when Islamic courts leaders said Ethiopia troops had crossed the border, hinting they had gone to support Mr Yusuf.
Mr Yusuf had earlier insisted there would be no negotiations unless the Union of Islamic Courts recognised his interim government.
He also said the Islamists only seized the city because they were backed by thousands of extremists from around the world.
The Union of Islamic Courts denies harbouring al-Qaeda fighters.
Sudan's President Omar al-Bashir, who is the current chairman of the Arab League, has offered to mediated between the two sides at talks in Khartoum.
No Ethiopia deal
The 10-member delegation from the Union of Islamic Courts is led by deputy chairman Sheikh Husein Mohamud Jumaale.
After meeting Ethiopia's Prime Minister Meles Zenawi in Addis Ababa on Tuesday, Mr Yusuf denied accusations that Ethiopian troops were in the Somali town of Baidoa, where his government is based.
"We have not done any military agreement with the government of Ethiopia," he said.
Ethiopia has also denied the charges.
During the 1990s, Ethiopia backed Mr Yusuf in his fight against Somali Islamist groups.
He also said that the Islamic courts were not supported by the majority of Somalis.
"They could not have overtaken Mogadishu if they did not have the backing of extremists from around the world," he said.
"The Islamists' forces have an international reach and they have many collaborators from around the world... They are by the thousands."
The Islamic courts have organised huge protests in Mogadishu against Mr Yusuf's call for foreign peacekeepers in Somalia.
Mr Yusuf's government does not control much territory and is based in Baidoa, 200km north of Mogadishu.
Both the United Nations and the African Union are sending teams to Somalia to meet the Islamic courts leaders and assess the possibility of sending peacekeepers, respectively.
The Islamic courts are Somalia's strongest force
Uganda has said it is ready to send troops but only when the security situation improves.
"Since the warlords have not yet agreed to a ceasefire, there is no peace to keep," Uganda defence spokesman Maj Felix Kulayigye told the AP news agency.
The deployment of any peacekeepers would require the UN to lift its arms embargo on Somalia.