(adds reaction, details, background)

By Tsegaye Tadesse and Andrew Heavens

ADDIS ABABA, April 22 (Reuters) - Ethiopia said on Sunday that eight of its nationals kidnapped last month with a group of European travellers in a remote northern desert region had been released safely by its foe and neighbour Eritrea.

Asmara has always denied involvement in their abduction. The saga had put further strain on ties between the two Horn of Africa nations, who fought a 1998-2000 border war.

"After being held hostage by Eritrea, the eight Ethiopian nationals have crossed from Eritrean territory into Ethiopian territory and are now in the hands of Ethiopian security bosses," the government said in a statement.

"Their release is due to pressure imposed on Eritrea by the international community," it added. "They are in good health."

There was no immediate comment from Eritrea, but Ismael Ali Sero, head of Ethiopia's Afar administrative region, said the release was brokered by Afar elders on both sides of barren, border-straddling area populated mainly by nomads.

"The hostages taken by members of the Eritrean armed forces were released after Afar elders from Ethiopia crossed the border and spoke to Afar elders in Eritrea," he told Reuters.

The eight Ethiopians and five Europeans -- three British men, one Italian-British woman, and a French woman all linked to the British Embassy -- were seized at gunpoint at a salt-trading village called Hamad-Ile on March 1.

The Europeans were freed in Eritrea after 12 days, but nothing had been heard of their Ethiopian guides until Sunday.

"We are absolutely delighted to hear that they're free," one of the Europeans, Rosanna Moore, told Reuters in Addis Ababa.

"We're only going to feel totally satisfied when we see them. We want to make sure that they are OK, that they were not mistreated," added Moore, the Italian-British wife of the head of the British Council in Ethiopia.

"AMAZING NEWS"

Addis Ababa said Asmara was behind the prolonged abduction of the eight, but Eritrea denied that as malicious propaganda.

Analysts believe a separatist rebel group from the Afar region was behind the original kidnap, perhaps stumbling across the foreigners after raiding a local tax-office at Hamad-Ile.

"It is amazing news," said Tony Hickey, owner of the travel company that organised the original, ill-fated Afar trip and later helped organise a pressure group to push for the Ethiopians' release.

"Everone is phoning everyone ... There are lots of happy people across Ethiopia and Afar tonight ... We have never been so happy to get a job done," he said.

Two of the eight were orphans from Ethiopia's 1984 famine.

Officials said they were all resting at Hamad-Ile on Sunday and would likely reach the area capital on Tuesday.

One of the hottest and most barren regions on earth, the Afar was described by British explorer Wilfred Thesiger as a "veritable land of death." It includes the famous Danakil Depression, a plateau of desert and salt-lakes visited only by local nomads and the occasional adventure tourist.

Kidnappings have been a feature of Afar history, but most cases -- including Italian tourists taken in the mid-1990s -- have ended in releases.