Ethnic clashes in Moyale area, southern Ethiopia, are reported to have left at least 18 people dead and 12 others injured.
More than 20,000 people have crossed into Kenya to escape the fighting, the Kenyan Red Cross says.
People were continuing to cross the border although Ethiopian government forces had intervened to stop the fighting.
The clashes, in the Moyale area, are thought to have been sparked by a simmering dispute over land rights.
More than 20,000 people have crossed into Kenya to escape Moyale fighting in Ethiopia
Fighting involving the Borana and Garri communities is said to have started mid-week, and to have continued until Friday.
Local reports speak of armed militias taking up positions in outlying villages on Wednesday, with the fighting spreading to Moyale town, on the Ethiopia-Kenya border, on Thursday.
Many of those who fled across the border into the Kenyan side of Moyale are having to sleep out in the open.
The Red Cross says it is providing those who have been displaced with food, water and tarpaulins.
Prime Minister Meles Zenawi has been hospitalized, Ethiopia’s government confirms, but it denies he is critically ill.
“He is not in a critical state. He is in good condition,” spokesman Bereket Simon told the AFP news agency.
Speculation about his health began when he missed last weekend’s African Union summit in Addis Ababa.
There were reports that Meles Zenawi was in hospital in Belgium, suffering from a stomach complaint.
Diplomatic sources in Brussels told AFP that the Ethiopian leader was in a hospital in the Belgian capital.
Speculation about Meles Zenawi’s health began when he missed last weekend's African Union summit in Addis Ababa
“He is in a critical state, his life is in danger,” the agency was told by a diplomat who asked not to be named.
An Ethiopian government press conference about the rumors scheduled for Wednesday morning has been postponed until later this week.
Correspondents say it is believed Meles Zenawi’s last public appearance was at the G20 talks in Mexico last month.
Meles Zenawi took power as the leader of a rebel movement which ousted the communist government of Mengistu Haile Mariam in 1991.
He has won several elections since then, but his political opponents have accused him of using repression to retain power.
Five foreign tourists have been killed and other four have been kidnapped in Ethiopia during an attack by unknown gunmen, the government says.
European nationals are among those killed, government official Berekat Simon said. He said Europeans were also thought to be among four people kidnapped in the attack.
The attack was carried out late Monday in the northern Afar region.
Eritrea has denied Ethiopian government accusations that it sponsored the gunmen involved.
Afar is regarded as a haunt of both Ethiopian and Eritrean rebels.
Ethiopia and Eritrea have been bitter adversaries since their 1998-2000 border war.
Two other tourists were seriously hurt and a third is said to have escaped the attack unharmed, said Ethiopian Television (ETV).
It said the two injured tourists had been taken to a clinic by defense forces.
“The group of foreign tourists was attacked by gunmen late on Monday by members of a group that was trained and armed by the Eritrean government,” Ethiopian government spokesman Bereket Simon told Reuters.
“It is the usual terrorist activity by the regime.”
But an Eritrean official dismissed the accusation as baseless.
A Western diplomat also told Reuters that German nationals were among those killed, but that has not been confirmed.
However, reports in the German media said the tourists had been near the Erta Ale volcano.
Eritrea gained independence from Ethiopia in 1993 but the two countries soon became embroiled in border disputes.
