The attack comes as powerful Islamic militia and government forces, who have been firing test artillery, girded for an all-out war after peace talks collapsed in Khartoum.
Government officials confirmed the ambush, and blamed it on the Islamists militia controlling vast swathes of southern and central Somalia.
Witnesses said the soldiers were travelling from Manas military base to Baidoa, about 250 kilometres (155 miles) north-west of the capital Mogadishu when they came under artillery fire from the jungle.
"I saw a government vehicle mounted with a machine gun come under attack as it entered the town. The attack left two soldiers dead and four others wounded," said Hilaal Mohamed Abukar, who lives near Baidoa hospital.
The Islamists said their supporters had killed carried out the ambush, killing Ethiopian forces and marking the start of "holy war".
"Jihad has started around areas where Ethiopian forces are staying, like in Baidoa. We thank the local people who have started ambushing the Ethiopian forces," said Sheikh Mukhtar Robow, the Islamists' deputy defence chief.
"The attack was carried out by locals who support the Islamic courts," he said, adding: "Ethiopians have been killed and others wounded."
"Wherever Ethiopians are they will be killed. We call on locals who translate for Ethiopians to stay away, otherwise we shall slaughter them," he told a press conference in southern Mogadishu.
Meanwhile, Baidoa residents said government forces, backed by Ethiopian troops, raided houses in this dusty provincial outpost to flush out clerics suspected of links with the Islamic movement.
"They didn't ask us anything but checked all houses in the area and they found nothing," said Mohamed Mohammed, a resident of Berdale neighbourhood that was raided.
Witnesses reported seeing 33 Ethiopian forces. Somali government officials could not be reached for comment.
"Ethiopian soldiers and Somali government security forces are conducting joint security operations in some villages in Baidoa," said Adaf Sheikh Mumin, another resident.
"They are looking for Islamic courts supporters who could sneak into Baidoa villages," he added.
A police official, speaking on condition of anonymity, said "government forces responded and chased the assailants".
The attacks came as the Islamists and weak government forces reinforced front-line positions on the ground and kept up artillery duels, heightening fears that the Horn of Africa nation was headed to all-out war.

Copyright AFP (Agence France-Presse), 2006