Eritrea's president will make a historic visit to Ethiopia this weekend, cementing a stunning rapprochement with his giant neighbour after a generation of mutual hate and mistrust.

Isaias Afwerki will arrive in Ethiopia on Saturday, Eritrea's Information Minister Yemane Meskel said on Friday, after the neighbours declared this week that their "state of war" was over.

Eritrea will reopen its embassy in the capital Addis Ababa, closed since 1998, on Sunday, Ethiopian government spokesperson Ahmed Shide told reporters.

The rapid changes come after Ethiopian Prime Minister Abiy Ahmed launched a peace initiative last month. He visited Eritrea's capital last weekend and signed a pact with Isaias on resuming ties, a move that ended a near 20-year military standoff after a border war.

In a tweet, Yemane quoted Isaias as saying the people of the two nations had "renewed their historic alliance and are marching forward in lock-step for mutual prosperity and stability".

State-affiliated Fana Broadcasting reported that the Eritrean delegation was expected to visit the Hawassa industrial park in the Southern Nations, Nationalities and People's Region state.

The Horn of Africa neighbours have agreed to open embassies, develop ports and resume flights, in concrete signs of rapprochement after two decades of hostility since war erupted over their disputed border in 1998.

Abiy's chief of staff tweeted that the visit will last three days.

The reconciliation could transform politics and security in the volatile Horn region, which hundreds of thousands of young people have fled in search of safety and opportunities in Europe.

Under the new reformist prime minister, Ethiopia is opening up to the outside world after decades of security-obsessed relative isolation.

Since he took office in April, Abiy has announced plans to partially open up the economy, including attracting foreign capital into the state-run telecoms company and national airline. The country, with a population of 100 million people, has seen rapid economic growth over the past decade.