Ethiopian government spokeswoman Selome Taddesse said two Eritrean planes had attacked a fuel depot inside the town but missed their intended target.

She gave no further details of the attack, which was alleged to have taken place at 10:45 a.m. (0745 GMT). She could also not say if there were any casualties or damage to buildings.

Adigrat is a small highlands market town about 30 km (20 miles) from the border with Eritrea.

It was hit by Eritrean aircraft during fighting last June but a hotel guest reached by telephone from Nairobi on Friday said he not heard any new bombing. ``There is peace in Adigrat.''

A long-running border dispute between the two Horn of Africa nations exploded into a short ground and air war last May.

Hundreds of soldiers and dozens of civilians were killed in the clashes but fighting died down in mid-June and both sides agreed to suspend cross-border air raids.

``Today's attack by Eritrea is a flagrant violation of the U.S.-brokered moratorium on air strikes agreed to by Ethiopia and Eritrea in June of 1998,'' Selome said in a statement.

She said the bombing raid was ``the latest act in a pattern of provocative behaviour'' and demonstrated that Eritrea ``has no intention of pursuing a peaceful resolution to the conflict and has no respect for international agreements.''

But Eritrean presidential adviser Yermane Gebremeskel said Ethiopia was lying in a bid to justify a military offensive by its own armed forces.

``It's a complete fabrication,'' Gebremeskel told Reuters in the Eritrean capital Asmara. ``It betrays their intentions. They want to break the air moratorium and they want to declare war. They want to blame us for starting it,'' he said.

He said Eritrea wanted international observers placed along the border so they can report on any violations of the air raid moratorium, adding that the U.S. government should investigate Ethiopia's allegations.

``Ethiopians should not be allowed to get away with this lie. We are angry at this fabrications. We have not broken this moratorium,'' he said.

There was no independent confirmation of the attack as telephone links to the area were extremely difficult.

Diplomatic efforts to resolve the bitter dispute have been stepped up in recent weeks as both sides reinforced their border positions with troops and artillery, and accused each other of sporadic shelling across the border.

Salim Ahmed Salim, secretary-general of the Organisation of African Unity, on Friday urged both sides to show restraint.

``We think that it is very important and in the interests of the two peoples to show restraint and avoid all-out war,'' Salim said in Burkina Faso's capital Ouagadougou on Friday.

United Nations mediator Mohamed Sahnoun is currently in the Ethiopian capital Addis Ababa to meet Prime Minister Meles Zenawi, having held two days of talks with Eritrean President Isayas Afewerki earlier this week.