President Ortega is a leftist ally of Ecuador's President Correa

The move comes amid a growing crisis over a Colombian raid into Ecuador to kill leftist Farc rebels.

Venezuela and Ecuador have already broken off diplomatic ties and moved troops to their borders with Colombia.

Mr Ortega said "we are breaking off relations because of the political terrorism" carried out by Colombian President Alvaro Uribe.

He made the announcement in his capital, Managua, with Ecuadorean President Rafael Correa at his side.

Mr Correa is on a tour of Latin American capitals to rally opposition to Colombia's cross-border raid on Saturday.

The situation shows that everyone needs to be vigilant about the use of border areas by terrorist organisations like the Farc

Condoleezza Rice

Pride fuels tensions Borders a sensitive issue

Senior Colombian Farc rebel leader Raul Reyes was killed along with at least 16 other people at a jungle camp just inside Ecuador's border.

Tensions have risen in the region since the raid.

Venezuela says 9,000 soldiers have been moved to the border with Colombia, while Ecuador says 3,200 of its forces have been deployed.

Latin American leaders have urged calm and US Secretary of State Condoleezza Rice has called for a "diplomatic resolution" to the crisis.

"The situation shows that everyone needs to be vigilant about the use of border areas by terrorist organisations like the Farc," Ms Rice told a news conference in Brussels after a meeting of Nato foreign ministers.

'War crime'

Colombia has apologised to Ecuador but said the raid was necessary.

Ecuador has moved soldiers towards its border with Colombia

An opportunity for talks could arise in the Dominican Republic, where regional leaders are gathering for a meeting of the Rio Group.

Latin American presidents, including those from Colombia, Venezuela and Ecuador, are expected to meet on Friday.

The presidents of Ecuador and Venezuela have called for clear international condemnation of Colombia's actions.

The Organisation of American States (OAS) on Wednesday unanimously approved a resolution saying that Colombia had violated the "principles of international law" by crossing into Ecuador, but stopped short of an outright condemnation.

The 34 OAS member states agreed to set up a commission of inquiry led by OAS head Jose Miguel Insulza to investigate the incursion and scheduled a meeting of OAS foreign ministers for 17 March.

Colombia has waged a four-decade conflict with Farc rebels who finance themselves through the cocaine trade and by kidnapping hostages for ransom or political gain.

Venezuelan President Hugo Chavez had become involved in mediation efforts to free Farc-held hostages in Colombia, securing the release of six this year.

He branded the Colombian raid a "war crime", adding that Bogota, which receives billions of dollars in aid from Washington to fight drug-trafficking, was just a "lackey of United States imperialism".

He dismissed Colombian claims that a laptop found during its raid on the rebel camp in Ecuador held files indicating that Venezuela had given the Farc $300m (£150m).