Six Norwegian diplomats will have to leave Ethiopia because of interference in the country's internal affairs, a foreign ministry spokesman has said.
Ethiopia has been locked in a border dispute with Eritrea
Spokesman Wahide Belay said that only an ambassador and two others can remain after 15 September.
Ethiopia is insisting it has not severed diplomatic relations with Norway but is unhappy with its dealings with Eritrea in particular.
Norway says it regrets Ethiopia's unwillingness to discuss the issue.
The BBC's Elizabeth Blunt in Addis Ababa says the row has been caused by Norway's support for the next round of border talks with Eritrea to be held at UN headquarters in New York, an idea rapidly vetoed by Ethiopia.
Ethiopia and Eritrea fought a bitter territorial war and there are fears that they are headed for a fresh conflict.
"They claim we are undermining the national security by our involvement in the peace and reconciliation in the Horn of Africa," Norway's deputy foreign minister Raymond Johansen told the BBC's Network Africa programme.
Mr Wahide said Norway had been warned on several occasions.
But Mr Johansen says they had never taken unilateral decisions over the Eritrea- Ethiopia border conflict.
"We have no interest of our own in the conflict and have maintained an open and frank contact with all the parties involved," Mr Johansen said.
Mr Wahide said that his government had not wanted to take this action and would be willing to reconsider if Norway was prepared to "rectify its mistakes and be more helpful in the region".
But he said Norway had been pampering "spoiler forces" in the region - naming Islamist rebels in Somalia and insurgent groups active in Ethiopia as well as Eritrea.
The Norwegian embassy in Addis Ababa normally has a staff of nine diplomats.