An arbitration commission at The Hague has ruled that Eritrea violated international law when it invaded northern Ethiopia in May 1998.
The ruling from the Eritrea-Ethiopia Claims Commission said the attack could not be justified as lawful self-defense under the United Nations charter.
Since the signing of a peace treaty in 2000, the two nations have allowed U.N. peacekeepers along their shared border to help prepare for formal demarcation.
Ethiopia continues to call for more talks on demarcation, while Eritrea has insisted that it will not talk until Ethiopia accepts the border ruling issued in 2003.
Earlier this month, both countries moved troops closer to the border, while Eritrea ordered U.N. peacekeepers from the United States, Europe and Canada to leave. The developments have sparked worries that another armed conflict over the border could occur.
The border conflit between 1998 and 2000 killed some 70,000 people.