Two Djibouti say two soldiers have been killed and 17 wounded in border clashes with Eritrean troops, Djibouti says.
Fighting continued on Wednesday morning after clashes broke out on Tuesday following weeks of rising tension.
Djibouti said its forces were forced to fight back after coming under fire from Eritrean troops demanding the return
of deserters who had fled to Djibouti.
Last month, Djibouti complained to the UN that Eritrea was fortifying its side of the border.
At the time, Eritrea denied it was planning for war and has not commented so far on the latest incident.
Since Eritrea gained independence in 1993, the Horn of Africa country has been involved in two serious conflicts over territory with its neighbours.
Both US and France have military bases in Djibouti.