Ethiopian Prime Minister Abiy Ahmed hugged Isaias after he arrived at the airport on Saturday, before they left together in the same armoured four-wheel drive car, the latest sign of rapprochement between the Horn of Africa neighbours.

"Welcome home President Isaias!!" Abiy's chief of staff, Fitsum Arega, wrote on Twitter, saying the Eritrean leader "received a heartfelt warm welcome" from the Ethiopian prime minister on his arrival.

The meeting comes a week after Abiy visited Eritrea and signed a pact with Isaias on resuming ties, a move that ended a near 20-year military stand-off after a border war.

Eritrea formally seceded from Ethiopia in 1993 after a long war of independence, but the two went to war in 1998 over a border dispute. Although a peace deal was signed two years later, Ethiopia refused to implement it, saying it wanted more talks.

Reconciliation between Ethiopia and Eritrea could change politics and security in the volatile Horn of Africa region, which hundreds of thousands of young people have fled in search of safety and opportunities in Europe.

Thousands thronged Addis Ababa's main thoroughfare Bole Road, sporting T-shirts emblazoned with the pictures of both leaders, a Reuters witness said. Flags of both nations fluttered from lamp posts, while some people waved giant Eritrean flags.

Eritrea and Ethiopia have so far agreed to open embassies, develop ports and restart flights. Eritrea is due to reopen its embassy in Addis Ababa on Monday.

Abiy, who is also trying to bring stability to a country that has been torn by protests since 2015, survived a grenade attack last month.

Australian Associated Press