The Ethiopians are not popular in Somalia
Islamist insurgents say they now control Guriel, where Ethiopia had a big military base to secure the road linking the two countries.
A BBC correspondent in Somalia says it is not clear why the Ethiopian troops withdrew without any fighting.
Guriel was a stronghold of the Union of Islamic Courts (UIC), which lost power to Ethiopian-backed government troops a year ago this week.
The BBC's Ayanleh Hussein in Guriel says residents have been cheering the Ethiopians' departure.
During the occupation the local hospital was out of use as it was used as the Ethiopians' military base, he says.
Meanwhile, unrest continues in the capital, Mogadishu, where most Ethiopian forces in the country have been based since last year's invasion, which ended the UIC's six-month rule.
The bodies of four civilians were discovered after battles between insurgents and Ethiopian troops on Thursday around the animal market in the north of the city.
Somalia has been politically fragmented since 1991 and the country's transitional government, faced with an insurgency, is dependent on international aid and Ethiopian military support.