Ethiopia relies on Djibouti for its sea-bound imports and exports after Eritrea's independence from Ethiopia 17 years ago left Ethiopia a landlocked country.

Djibouti President Ismail Omar Guelleh said earlier this month Eritrean soldiers had entered his nation, digging trenches and building defences.

"The recent Eritrea-Djibouti row was a threat to the peace and security of the whole Horn of Africa," Meles said in an address to the country's business community.

"They (Eritreans) do act silly sometimes, but I don't think they would go totally insane."

Meles said he will strive to secure the route between Ethiopia and Djibouti's port, but did not elaborate on exactly how this would be achieved.

"In the face of the unpredictable nature of the Eritrean regime ... Ethiopia will make sure the corridor is safe and sound," he said.

Eritrean President Isaias Afwerki has denied sending troops into neighbouring Djibouti, saying Asmara had no desire for another crisis in the Horn of Africa.

"It is a fabrication, we know, there is no basis for that ..there has never been any problem," the Eritrean leader said in an interview with Reuters on Tuesday.

Eritrea and Ethiopia are long-time foes and were involved in a border war in 1998-2000.