This hilltop town has always lain like a prize 23 miles inside Eritrea, the country Ethiopia has been fighting for two years in a dispute over an ill-defined border. But Thursday, Ethiopian troops pushed beyond the contested borderlands and marched in. The prize suddenly was theirs.

Ethiopian commanders explained today that they came this far north in pursuit of a fleeing Eritrean army, pushed into disarray by a surprise two-prong attack across hardened trenches one week ago. Barentu was the natural point of retreat, behind the scrubby hills that defined the front, beyond a flood plain speckled with palms and atop a rise that until this week defined the rear of Eritrea's side of the western front.

Crowning the town, and serving as command center, was a fortress built by the Italians who colonized Eritrea in the 19th century. Today Ethiopian soldiers lounged on its stone steps, their idle chatter carrying above a largely unscathed, preternaturally quiet downtown. Almost the entire civilian population obeyed their government's order to evacuate when it was clear Barentu was about to fall.

"They held a mountain," said Gemuchu Dadi, 21, an Ethiopian soldier. "We had to fight two days to push them out."

The mountain sits astride the main road, and the Ethiopian soldiers stationed at the decisive pass were still beaming two days later. Shell casings, confiscated rifles and recovered land mines lined the shoulder. The late afternoon breeze carried the smell of decaying flesh.

Eritreans took the worst of the battle, according to Col. Gabre Kidan, an Ethiopian commander, but he said he had no casualty counts. Most of the Eritrean forces quit Barentu along with the civilian population, however, and Kidan said they left behind many military supplies and most of their armor, including tanks.

"We used the tanks immediately," he said.

The bulk of the retreating Eritrean force was thought to be 10 miles to the north, pursued by Ethiopian forces along a road leading to Agordat, the provincial capital 40 miles to the northeast. If a counterattack remained a possibility, the garrison inside Barentu appeared relaxed.

"We are Ethiopian soldiers," said John Tagabe, 21. "We are happy."

Eritrea is not. And what its government will do next has become the most pressing question of Ethiopia's week-old offensive. Eritrea abandoned Barentu in what a government spokesman called a "strategic retreat." And although the phrase brought scoffs from Ethiopian officials, it resonates with the Eritrean public.

In a closely knit country born only seven years ago, "strategic retreat" was the key to keeping a guerrilla army intact through a lonely 30-year liberation war against the Ethiopian government in Addis Ababa. That war defined almost everything about Eritrea, an exceptionally cohesive society in which the typical family lost not one but two members in "the struggle."

Staying alive to fight another day has been the watchword of the Eritrean military in this conflict as well, said Yemane Ghebremeskel, an adviser to Issaias Afwerki, who led the rebel army and now is Eritrea's president and chairman of the Executive Council of the People's Front for Democracy and Justice. Ethiopia brings the resources of 63 million citizens to its end of the fight. The population of Eritrea is about 4 million.

But the war is not for liberation; it is about sovereignty and territory. The opponent is both historical enemy and ally: Ethiopia's current government was formed from a rebel army that fought alongside Eritrean rebels in the 1970s and 1980s to topple a repressive Marxist government in Addis Ababa.

Earlier military losses were restricted to the border. And each brought Issaias to the bargaining table. When Ethiopia took the Badame plain in February 1998, Eritrea's president instantly withdrew one set of objections to an Organization of African Unity peace plan. When an Eritrean counteroffensive failed to retake the plain that June, another set of objections fell.

Outsiders are hoping it will happen again. Since the latest round of fighting broke out a week ago, the U.N. Security Council has passed an arms embargo aimed at both countries. The goal is to prevent a prolonged war and to pressure both sides to negotiate.

Ethiopia, however, says it is not in a mood to talk.

"Basically, it's: You wanted it? You're going to get it," said one Ethiopian official, speaking privately.

Casualties on the Ethiopian side are officially described as low, relative to the prolonged trench-line battles that defined earlier clashes. And few bodies are visible on battlefields between here and the border, at least from passing vehicles.

And the victories continue to roll up--according to Ethiopia. Government spokesmen announced today the capture of yet another village on the road extending east from Barentu toward the central front around Mendefera, a town about 75 miles east of here and only 35 miles south of the Eritrean capital, Asmara.

"Salaam," said one of several hundred soldiers seen moving today from Barentu toward the central front--where fighting is expected to intensify, perhaps at Mendefera. "Peace."

"It was not so hard," he said of the battle here. "It's okay. No problem."