Islamic courts controlling the Somali capital will not take part in talks with the government unless Ethiopian troops leave Somalia, an official says.
Islamist militia have taken control of much of southern Somalia
Earlier, Somalia's interim government agreed unconditionally to hold peace talks with the Islamists.
Talks to try and avert conflict between the two sides broke down last week.
The Union of Islamic Courts has vowed to expel Ethiopian troops who are deployed in Baidoa to assist the weak transitional Somali government.
"There is a condition for talks: as long as the enemy is in our country it will be impossible to sit down together and hold talks (with the transitional government)," Sheik Hassan Dahir Aweys, Chairman of the Islamic courts' consultative council told the BBC Somali service.
"We want the Ethiopian government, which has invaded Somalia and threatened Somalia, to leave our country, so that we can hold talks."
Ethiopia is a firm ally of the transitional government, which has little influence outside the town of Baidoa where it is based.
UN envoy Francois Fall met leaders of the Union of Islamic Courts in Mogadishu.
Earlier he met representatives of the transitional government in Baidoa and received an assurance that the government would participate in talks in the Sudanese captal, Khartoum.
"We will go to Khartoum without any preconditions," President Abdullahi Yusuf's chief of staff, Abdirizak Adam, was quoted by reporters as saying.
The talks were due to begin at the weekend, but the government refused to attend and the UIC delegates walked out in protest at the presence of Ethiopian troops in Somalia.
On Monday, thousands of Somalis staged a rally in Mogadishu calling on Ethiopian troops to leave.
The demonstrators burnt Ethiopian flags at a protest in the capital.
As well as Baidoa, Ethiopian troops have also been seen in another central town, Wajid.
Ethiopia and the transitional government have refused to confirm Ethiopian troops are on Somali soil.
Islamic leader Sheikh Sharif Sheikh Ahmed told the rally that forces loyal to the Islamic courts were ready and would be allowed to fight Ethiopians when appropriate.
Ethiopia, a long-term ally of President Abdullahi Yusuf, has warned the Islamic courts not to make any further military advance on Baidoa.
In recent weeks the Islamic courts have wrested control of much of southern Somalia from many of the warlords who divided up the country into rival fiefdoms following the overthrow of Siad Barre in 1991.
They appear to be making considerable progress in imposing law and order in the capital.