Ethiopian forces have killed 123 rebels in the eastern region of the country, an official has told the BBC.
The rebels are reportedly from the ONLF, fighting in Ethiopia’s Somali region.
They have been fighting Ethiopian control of the area since the 1970s.
A further 90 rebels are surrounded, says Abdi Mohamoud Omar, president of the Somali region of Ethiopia, and unless they surrender, further measures will be taken against them.
The force of around 200 rebels landed on the Red Sea coast on Saturday, the authorities in Somaliland said. They were then taken by truck to the Ethiopian border.
Somaliland – which has declared independence from the rest of Somalia but has not been internationally recognised – has previously helped the Ethiopian government in its fight against the ONLF (Ogaden National Liberation Front).
Mr Abdi says his forces encircled the ONLF rebels in the remote Maar Maar mountains, which form the porous border region between Somaliland, Ethiopia and Djibouti.
A senior ONLF commander, known as Hassan Bossaso, was captured, Mr Abdi told the BBC.
Ethiopia blames its regional arch-enemy, Eritrea, for supporting the ONLF – an accusation Eritrea denies.
The ONLF wants self-determination for residents of Ethiopia’s Somali region, which is also known as Ogaden.
In recent months, the Ethiopian government has signed peace agreements with various ONLF factions, says the BBC World Service’s Africa editor, Martin Plaut.
However, Ethiopia has not ended its conflict with the group led by the former head of the Somali navy, Admiral Mohamed Omar Osman.
This is the group reported to have mounted the latest attack, although our editor says it has now been all but eliminated as a rebel force.