Mr Shargudud said Somalia's new President, Abdulkassim Salat Hassan, had failed to implement Baidoa as the capital.
Hundreds of people in the area controlled by the RRA faction have demonstrated in protest at his decision.
The Ethiopian Government is said to have trained thousands of militia for the RRA and deployed troops on their behalf to capture territory inside Somalia, though Addis Ababa has always denied such reports.
Travellers from the border area between RRA-controlled territory and Ethiopia report a build-up of Ethiopian forces within Somalia.
Broken promises
The main town under RRA control, Baidoa, was considered as a possible capital for the new Somali Government, but it was later decided to retain the current capital, Mogadishu.
Mr Shargudud said Somalia's new President, Abdulkassim Salat Hassan, had failed to implement Baidoa as the capital.
He also said the speaker of the new assembly had been imposed on the RRA without Mr Shargudud's consent.
The man elected speaker, Abdallah Deerow Isaaq, is the secretary general of the RRA but is reported to have disagreed with Mr Shargudud over the distribution of the RRA's quota of MPs.
Protests
Hundreds of people in towns and villages across the Bay and Bakol regions, controlled by the RRA, demonstrated in support of Somalia's transitional assembly on Tuesday.
They shouted slogans such as "we oppose selfish leaders" and "no room for traitors in Bay and Bakol".
Religious leaders and clan elders in Bay and Bakol regions have also opposed Mr Shargudud's decision.
Troop build-up
Travellers reaching Mogadishu from the Ethiopian border say Ethiopian forces are already present in three towns in Gedo region and are advancing into Bay and Bakol regions.
One lorry driver estimated there were more than 2,500 troops in three border towns, but there were no reports of any fighting or attacks by the Ethiopians.
The Ethiopian Government has assisted a number of factions within Somalia in return for action against Ethiopian armed opposition groups based inside Somalia although Ethiopia always denies such reports.