A Somali Islamist leader has ordered a "holy war" to drive out Ethiopian troops, after they entered the country to protect the weak interim government.
The Islamists control much of southern Somalia
"I am calling on the Somali people to wage a holy war against Ethiopians in Somalia," said Sheikh Hassan Dahir Aweys of the Union of Islamic Courts.
Ethiopia denies that its forces are in the government's base of Baidoa, but a BBC reporter has seen them patrolling.
The UIC took control of the capital, Mogadishu, last month.
Since then it has consolidated its power over much of southern Somalia.
But Ethiopia is strongly opposed to the Islamists and has repeatedly warned that it will send its army into Somalia if the interim government is attacked.
On Wednesday, Islamist militiamen were reported to have advanced to within 60km (37 miles) of Baidoa. They have since withdrawn and deny planning to attack the town.
Ethiopia has been a long-term ally of President Abdullahi Yusuf and in the 1990s helped him defeat an Islamist militia led by Mr Aweys.
Speaking on national radio station Shabelle, Mr Aweys accused President Yusuf of being "a servant of Ethiopia for a long time".
The BBC's Mohammed Olad Hassan in Baidoa says the town is calm and a curfew has been imposed.
In the capital, thousands of people participated in what was called a peace demonstration to show how the city had been transformed in the last month under Mogadishu's new rulers.
Correspondents say a convoy of some 500 cars travelled from one side of Mogadishu to another without passing through any checkpoints, which until last month dominated the city.
Mogadishu's residents have lived through 15 years of anarchy as rival warlords divided up the capital into separate fiefdoms.
Crowds gathered at the sides of the roads and clapped and waved branches as the vehicles passed by.
They also chanted anti-Ethiopian slogans during the demonstration, urging the Ethiopian troops to withdraw from Baidoa.
Our correspondent says peace talks in the Sudanese capital of Khartoum, where a UIC delegation has been waiting for over a week for the government, look even more unlikely to take place.
The UIC's head of security has said the talks will be cancelled if Ethiopian forces did not leave Somali soil.
Mr Aweys has denied US claims that he is linked to terrorism. He has been on the US list of people "linked to terrorism" since shortly after the 9/11 attacks in 2001.
A UN report earlier this year said that Mr Aweys had been getting significant military aid from Ethiopia's rival, Eritrea - a claim Eritrea has denied.