The Somali Islamist militant group, al-Shabaab, has launched an attack on the town of Aato on the Ethiopian border for the second time in just over a week.
A senior Ethiopian security official told the BBC that fighting broke out early on Friday between the militants and a combined force of Ethiopian federal soldiers and troops from the Somali region.
The official said there were casualties on both sides.
Last week, the al-Qaeda-linked group said it had killed dozens of Ethiopian security forces during cross border raids.
Officials in Addis Ababa said in response close to 200 al-Shabab fighters were killed.