Ethiopia denies deployment to Somalia, a day after residents reported seeing battlewagons filled with heavily armed Ethiopian troops cross the border.

Ethiopia's head of government information, Bereket Simon, acknowledged that "we have decided to enter based on our national interest," Reuters reported.

"We think the reason (for the reports) is that the extremists are losing ground and feel they can mobilize people by presenting Ethiopian interventions to the public," he said.

Witnesses and aid groups have reported sighting Ethiopia military personnel in the Horn of Africa state, dubbed "reconnaissance" missions by Addis Abba.

The new government of President Sheikh Sharif Ahmed, which has declared an all-out war on the rebels in the face of a fresh wave of attacks, faces the challenging task of restoring some sense of stability in the lawless country, which has been without a functioning government since 1991.

Government troops and allied militia have managed to push back the rebels who have control of large areas of Somalia including southern and central regions.

Africa Union troops are protecting government buildings and the airport in Mogadishu as clashes continue in the capital, which have claimed hundred of lives and displaced some 122,000 people since May 7.

"They came with battle wagons and trucks all full of soldiers and guns … everybody is very worried," said Hassan Abdi, a resident in the town of Balanbale in Galgadud region on Friday.

ZHD/SC/MD