African Union chief executive Jean Ping praised Eritrea and Djibouti Tuesday after the feuding neighbours agreed to mediation by Qatar to solve a border dispute.

Ping, whose own mediation offers were shunned by Asmara, said the deal could boost peace efforts in the region, where Eritrea is accused of supporting Somalia's Al Qaeda-inspired Shebab rebels.

"The chairperson welcomes this positive development," said an AU statement received by AFP.

"He equally expresses the hope that this welcome and promising endeavour would have a positive impact on the overall situation in the Horn of Africa... including the achievement of peace in Somalia," it added.

Doha said on Monday that Eritrean troops had withdrawn from an area they controlled in Djibouti as a result of its mediation bid.

The Qatari mediation provides for the formation of a committee empowered to appoint an international firm to demarcate the border, with Eritrea and Djibouti's consent, according to the official Qatari news agency QNA.

A Qatari observation force is tasked with monitoring the border between the two countries "until the conclusion of a final agreement on settling the conflict," QNA reported.

The force, made up of about 20 soldiers, arrived in Djibouti on Friday, according to Djibouti press reports.

The long-running border row between Djibouti and Eritrea over the disputed Ras Doumeira promontory on the shores of the Red Sea led to clashes in 1996, 1999 and again in 2008.

Qatar, a small Gulf country rich in natural gas and oil, has offered to mediate in various conflicts, including internal strife in Sudan, Yemen and Lebanon.