Washington fears that direct Ethiopian intervention in Somalia, where the government and Islamists are now girding for war, could engulf the Horn of Africa in conflict, drawing in Eritrea and possibly Kenya, the official said.
However, the United States believes it likely Addis Ababa will ignore the advice should the Islamists advance on the government seat of Baidoa and go ahead with invasion plans, the official said.
"We are discouraging them (the Ethiopians) to the extent possible not to engage in combat," the official told reporters in the Kenyan capital of Nairobi, speaking on condition of anonymity.
"We are certainly not encouraging them or using Ethiopia as a proxy as has been suggested," the official said. "We don't want them in there."
Ethiopia has denied reports it already has thousands of soldiers in Somalia but admits several hundred military advisers, trainers and support troops have been sent to assist the transitional Somali administration in Baidoa.
It has also made clear it will defend the internationally backed government and itself from attack by the Islamists who have declared a holy war against the Ethiopian troops allegedly in Somalia.
If the government is attacked, the US official said Ethiopia "will probably hold true" to its pledge with results "that would be devastating for the region."
The official said the feared war would likely suck in Ethiopia's arch-foe Eritrea, which reportedly has some 2,000 troops in Somalia to support the Islamists, and could spill into north-east Kenya home to many ethnic Somalis.
Ethiopia's south-east Ogaden region, also home to many ethnic Somalis, and Somalia's semi-autonomous enclaves of Puntland and Somaliland, which have thus far resisted the Islamist advance, could also be embroiled, the official said.
Washington is watching events in Somalia closely from its Joint Task Force-Horn of Africa (JTF-HOA) military base in neighbouring Djibouti and believes the situation there is now "very volatile," the official said.
The United States accuses elements of the Somali Islamist movement of ties to Al Qaeda and say suspects wanted for the 1998 bombings of the US embassies in Kenya and Tanzania are being harboured in Somalia.
Earlier this year, a covert US operation to fund Somali warlords fighting the Islamists for control of Mogadishu failed disastrously when the city fell in June after months of fierce clashes that killed hundreds.
The official said there are "indications" the alleged Al Qaeda links are still active and that foreign fighters affiliated with the terrorist network have set up training camps inside Somalia.

Copyright AFP (Agence France-Presse), 2006