Ali Ahmed Jama, the Somali government information minister, said: "Fighting is going on from one part of the country to the other. The Islamic Courts ... will lose in this fighting."'Full-blown war'
Both sides say they have killed hundreds since fighting began on Tuesday. Aid agencies say that dozens have died.
Ethiopia has previously denied that its forces were fighting in Somalia, saying it had sent only military advisers.Sheikh Mahmud Ibrahim Suley, an Islamic Courts leader, said the Ethiopians had used MiG warplanes and helicopters against their positions.
"[The Somali government] will defend the people it is responsible for and Somali sovereignty"
Ali Mohamed Gedi, Somali PM
Witnesses said that the Ethiopian combat aircraft bombed towns in central Somalia.
"I saw five military aircraft flying over Belet Weyne," said Ahmed Atto, a freelance reporter in the area.
One source from the town of Belet Weyne said: "The planes hit an Islamic centre where Islamic officials in the region have been enrolling volunteers who wanted to join the war."
Another witness said strikes were attacking the roads and defences of the Islamic militia.
"Now there is a full-blown war," said one fighter close to the semi-autonomous Puntland region, north of Baidoa.
Heavy fighting was reported round Daynunay, the government's forward military base about 20km southeast of Baidoa.
Fighting has also broken out in Manas to the west of Baidoa, Kalaber to the north and Bandiradley, close to the border with Puntland.
Somalia is seen as a potential proxy battleground for Ethiopia, which has one of the largest armies in the region, and its rival Eritrea, which backs the Islamic courts.
Somali sovereignty
The Islamic Courts Union has vowed to drive out Ethiopian troops that are providing military support to Somalia's UN-backed government.
He also denounced the US, saying Washington should be calling on Ethiopia to withdraw its troops.
Ali Mohamed Gedi, the Somali prime minister, has vowed that his government will "defend the people it is responsible for and Somali sovereignty" and said the Islamic fighters should return to negotiations.
Several rounds of talks, mediated by the Arab League, have failed to produce any lasting effect.
"They will be responsible for any consequences that may result from rejecting our call," Gedi said.