In a succession of war wins claimed by the government, the Tigray People's Liberation Front (TPLF) rebel group announced a retreat to their Tigray stronghold.
The TPLF's unverified withdrawal from Amhara and Afar raised expectations for talks to conclude a 13-month conflict that has killed thousands and left areas of the country near famine.
It said federal forces controlled eastern Amhara and Afar and were ordered to "vigilantly remain in regions under our control" on Friday.
"The Ethiopian government has decided not to instruct its forces to move farther into Tigray," it announced on Twitter.
After months of combat, both sides have claimed considerable territory gains.
The rebels claimed to be only 200 km (125 miles) from Addis Ababa, alarming foreign governments who advised their citizens to flee.
However, since Prime Minister Abiy Ahmed (2019 Nobel Peace Prize winner) went to the front last month, the government claims to have retaken several vital towns.
The TPLF's departure declaration on Monday was criticized as a cover for military defeats.
After accusing TPLF rebels of storming army barracks in November last year, Abiy moved soldiers into Tigray to overthrow them.
He promised a quick triumph, but the TPLF retook most of Tigray by June, then advanced into Afar and Amhara.