Ethiopia Woyanne has admitted there have been “skirmishes” between its troops and the rebel Ogaden National Liberation Front.
But the government once again denied ONLF claims that it had inflicted heavy losses on government forces.
The ONLF said on Sunday its forces had killed 140 soldiers in a battle near the eastern town of Wardheer.
The Ethiopian government Woyanne initially denied its forces were attacked. A BBC correspondent says reports of a major confrontation in the region persist.
The Ethiopian prime minister’s dictator’s spokesman, Bereket Simon, on Monday described the ONFL’s claims as “daydreams”.
He said no government soldiers had been killed in the Wardheer area and there had been no engagements between the army and the ONLF rebels.
He also denied the ONLF report that the prime minister’s security adviser, Abay Tsehay, the supposed target of the attack, had been to Wardheer.
Mr Bereket said Mr Abay had only attended meetings in the regional capital, Jijiga, in the company of the deputy prime minister.
However, an international aid worker in the region told BBC correspondent Elizabeth Blunt that there was confirmation an attack had taken place near Wardheer and that more than 100 people had been killed.
The aid worker added however that the government was increasingly relying on locally raised militias rather than the army in the region, and that it was possible that these militias rather than regular troops had been involved.
Last week, aid agencies reached an agreement with the government in Addis Ababa to provide emergency supplies for civilians in the region.
The ONLF was founded in 1984 and is fighting for independence from Ethiopia, complaining of discrimination by the central government against the Ogaden region’s Somali-speaking nomads.