The Islamic militiamen holding most of southern Somalia deployed hundreds of fighters outside the base of the U.N.-backed interim government Wednesday and said they planned to seize it.
Seizing Baidoa would make the Islamic militia, which the United States has linked to al Qaeda, the uncontested authority over most of the country.
Neighboring Ethiopia said it was prepared to invade to defend the Somali government.
"We have the responsibility to defend the border and the Somali government. We will crush them," Ethiopia's Minister of Information, Berhan Hailu, told The Associated Press.
The interim government was on high alert and ready to defend itself from a militia attack, Deputy Information Minister Salad Ali Jelle told the AP.
The administration, however, is virtually powerless and barely able to control Baidoa, 150 miles northwest of the capital, Mogadishu. No attack had taken place by nightfall Wednesday, and the Islamic militiamen generally do not fight at night.
The militiamen seized Mogadishu last month and have installed increasingly strict religious rule that sparked fears of a Taliban-style hard-line regime in this anarchic Horn of Africa nation. The United States has accused the militia of links to al Qaeda that include sheltering suspects in the 1998 bombings of U.S. embassies in Kenya and Tanzania.
Osama bin Laden has called Somalia a front in his global war against the U.S. and its allies.
"Nothing will stop us from going into Baidoa," said Sheik Muqtar Robow, deputy defense chief for the Islamic group. He said more than 130 fighters who were loyal to Somali transitional President Abdullahi Yusuf had defected to the Islamists' side.
A lower-ranking Islamic official denied fighters were planning to seize Baidoa, offering a different explanation for why the Islamists were spotted on the outskirts of the government seat.
"Our aim of going to the region is to convince people in the region to implement Islamic law and establish Islamic courts," said Mohamed Ibrahim Bilal, head of the local militia that seized control of Bur Haqaba.
Yusuf is allied with Ethiopia, and has asked for its support. Ethiopia has intervened militarily in Somalia in the past, and hundreds of Ethiopian troops have been spotted along the countries' border in recent weeks.
The Somali Islamist militants are allied with Muslim separatists in the Oromo region of Ethiopia.
A Cabinet minister in the Somali interim government was reported Tuesday to be recruiting militiamen to bolster the government and the deployment outside Baidoa appeared to be a pre-emptive strike.
Relations between the government and the Islamic militiamen already were strained after the government accused the Islamic group of planning to attack Baidoa, receiving help from foreign terrorists and massacring government supporters during recent fighting in Mogadishu.
The government had refused to meet the Islamic group in peace talks set for July 15 in neighboring Sudan, although it appeared to reverse course Monday under pressure from foreign governments pushing for a unified Somali administration.
The status of the talks was thrown into uncertainty by Wednesday's deployment.
Since its seizure of Mogadishu, the Islamic group has cracked down on purportedly non-Islamic activities such as a wedding with live music and a World Cup screening — shooting and killing two people who were watching.
It also replaced its moderate main leader with Sheik Hassan Dahir Aweys, whom the U.S. has linked to al Qaeda. Aweys denies the allegations.
In their latest hard-line move, Islamic militiamen with assault rifles raided five halls in northern Mogadishu Tuesday and arrested people who had paid to watch videos, residents said.
The residents said Islamic fighters arrested about 60 people during the raids. The chairman of a local Islamic court said his fighters detained only 14.
A recent recruiting video issued by militia members shows foreign militants fighting alongside the local extremists in Mogadishu, and invites Muslims from around the world to join in their "holy jihad."
Sheik Sharif Sheik Ahmed, a leader of the group, claimed the tape was fabricated by the United States.
Somalia has had no real government since the overthrow of a dictator in 1991.