After holding talks with his ally, Ethiopian Prime Minister Meles Zenawi, the Somali leader said Addis Ababa had not sent troops to support him and that the Islamists were plotting to seize the whole country.
President Yusuf's authority is under strong challenge from the Islamists,
Islamic courts chief Sheikh Shariff Sheikh Ahmed has claimed that Ethiopian troops had crossed the border to help Mr Yusuf defend his base in Baidoa, about 250 kilometres northwest of the capital, and warned of bloodshed if the Ethiopians did not leave.
"This is a rumour ... there are no Ethiopian troops in Baidoa," Mr Yusuf said. The president has hardened his stance against the courts, which regard him as no more than another unruly warlord.
In addition, Mr Yusuf renewed his call for the deployment of peacekeepers into Somalia, despite opposition from the Islamists, who have vowed to attack any foreign troops who step into the country.
Objections to peacekeepers
The East African grouping, the Inter-Governmental Authority on Development (IGAD), has long had problems with the deployment.
They range from an existing UN arms embargo on Somalia to opposition from the Islamists, who have taken control of the capital, Mogadishu, and several other key areas.
"On our part, we are ready and set for the deployment, but I think it takes time for the AU and IGAD to go in tandem to the UN Security Council to ask for the embargo on arms to be lifted," Mr Yusuf said.
After the setback of its latest strategy in Somalia, the United States pressed the Somali foes to open a dialogue on the future of their impoverished country, which is threatened by a combination further disintegration and acute food shortage.
Assistant Secretary of State for African Affairs Jendayi Frazer said Washington, which is accused of bankrolling the now-defeated warlords, is currently consulting with the region but has failed to restore a government in Somalia in the last 15 years.
"We need the Islamic Court Union to enter into a dialogue about the way forward for Somalia and for all groups to stop any aggressive moves, but rather to sit around the table," Mr Frazer told reporters in Kampala at a start of visit across east African to discuss the deteriorating situation in Somalia.
But Mr Yusuf rejected the call, saying he will not meet the Islamists until they recognise his powerless government and give up all the territories they have seized.
"As long as the Islamic Court Union recognizes the government ... and if they harbour democratic processes, then we will negotiate and open dialogue with them," Mr Yusuf said, officially throwing cold water on to efforts by east African nations.
Talks with no conditions
The Islamists, who have steadily continued to entrench Islamic theocracy, have announced readiness for talks, but not with conditions.
The UN and African Union plan to send teams to Somalia to assess security and meet the courts' officials.
The two Horn of Africa leaders met a day after General John Abizaid, the head of the US Central Command, held talks with Mr Meles on continuing efforts to combat terrorism while east African leaders and the Arab League swung into action to help avert a political crisis in Somalia.
A key US ally in Washington's so-called war on terrorism, the largely secular Ethiopia is nervous about the swift victory of the Islamist forces, whose influence could spur unrest in Ethiopia's south eastern Ogaden region, where ethnic Somalis have been fighting for greater autonomy.
The US, concerned about growing extremism in Somalia, helped bankroll a secular warlords alliance, the Alliance for the Restoration of Peace and Counter-Terrorism (ARPCT), in February.
The Islamists deny US claims that they have links to extremist groups such as Al-Qaeda and that they harbour foreign fighters, and instead claim to be working to restore law and order in the Horn of Africa nation.
Since dictator Mohamed Siad Barre was toppled in 1991, Somalia has been wracked by factional fighting, scuppering more than 14 internationally-backed efforts to restore a functional government in the poverty-stricken country of about 10 million.