In February, Somali President Mohamud said his country would "defend itself" if Ethiopia goes ahead with the Somaliland deal.
Somalia on Thursday expelled Ethiopian ambassador to Mogadishu as tensions between the two countries rise over the alleged interference in internal affairs.
The decision came after a cabinet meeting chaired by Prime Minister Hamza Barre saw Mogadishu promptly order the expulsion of Ambassador Muktar Mohamed Ware effective Thursday.
The decision also said that Ethiopian consular offices in Hargeisa, the capital of the breakaway region of Somaliland and Garowe, Puntland are closed.
The dispatch from Mr Hamza's office suggested Ethiopia had doubled down on interference. It came just a day after the semi-autonomous state of Puntland announced a new cooperation agreement with Addis Ababa, days after it withdrew from the country's federal system and said it would govern itself independently.
Puntland on Sunday rejected constitutional amendments on four chapters of the Constitution despite the federal parliament approving them a day earlier.
Somalia and Ethiopia have been bickering over Somaliland, even though Mogadishu had largely avoided expelling the ambassador and Ethiopian troops remained in Somalia under the African Union mission (Atmis).
In January, Addis Ababa and Hargeisa signed a memorandum of understanding (MoU) on cooperation which allowed landlocked Ethiopia to lease a port in Somaliland. In protest of the MoU signing, Somalia recalled its ambassador in Addis Ababa.
The tension has been exacerbated by the Ethiopian Foreign Ministry receiving a delegation from Puntland on Wednesday.