Chad broke off diplomatic relations with Sudan on Friday, accusing it of arming rebels who tried to storm the capital N'Djamena in an attack that killed 400 people.
Chadian President Idriss Deby also threatened to expel some 200,000 refugees from Sudan's troubled Darfur region living in Chad in retaliation for the rebel offensive on Thursday.
Rebels from the United Front for Change (FUC) who are fighting to overthrow Deby meanwhile said N'Djamena was still within their reach, denying government claims that the uprising had been crushed.
"For the moment there is calm, but that does not mean that we are not in range of N'Djamena," FUC spokesman Abdel Maname Mahamat Khattat told Radio France Internationale.
"It is a tactical withdrawal," he said.
The rebel offensive has triggered alarm in the international community and comes just weeks ahead of presidential elections in the oil-rich but impoverished state in sub-Saharan Africa.
According to the government, some 370 rebels and 30 soldiers died in the fighting in N'Djamena and another 150 rebels were killed in a battle at Adre, near the Sudanese border.
Deby, who has showed slain and captured rebels to his supporters, said his troops had subdued the FUC rebels in the capital and accused Khartoum of fomenting the uprising.
"We decided at a cabinet meeting this morning to break off relations unilaterally with Sudan, which continues to arm mercenaries opposed to the Chad government," he told a crowd outside his residence.
Deby said the international community had ignored his warnings that Sudan wanted to topple him and would now have to find another host for refugees from the three-year conflict in Darfur who are living in camps in eastern Chad.
Sudanese Foreign Minister Lam Akol Ajawin denied that Khartoum had backed the rebel offensive in the Chadian capital.
"We hope stability will prevail in Chad because instability adversely affects the security situation in the Sudan," he said.
The Sudanese foreign ministry said it would summon the Chadian ambassador to explain his government's decision to sever diplomatic relations.
Meanwhile, the Central African Republic said it had closed its border with Sudan in order not to "facilitate an attack against Chad from its territory."
The president of Chad is seeking a third term in the May 3 elections, but major opposition parties have pledged to boycott the vote, claiming they will be neither fair nor transparent.
Deby recently survived an assassination and coup attempt, and has suffered desertions and defections from his entourage since the end of last year.
Forces loyal to the president, identifiable by their red ribbons, patrolled N'Djamena on Friday, but there were fewer military vehicles deployed than the day before.
Businesses were open and taxis were running as normal.
The government also said it was in control of the town of Adre in the east of the country near the border with Sudan where, according to humanitarian sources, fighting had been subdued on Thursday evening.
The 15-member UN Security Council on Thursday strongly condemned the rebel offensive and urged Khartoum and N'Djamena not to conduct hostile activities against each other.
The members urged the Chadian and Sudanese governments to abide by a Feb. 8 accord under in which they agreed not to shelter rebels on their respective territory and not to conduct hostile activities against each other.
The New York-based group Human Rights Watch said fighting on the border between Chad and Sudan could put refugees from Darfur at risk.
"If Chadian rebels allied with Khartoum take control of the border region, the refugee camps may be vulnerable to attack from the Sudanese government-backed Janjaweed militia," a Human Rights Watch statement said.
The Janjaweed are accused of atrocities against civilians in Darfur.
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