ASMARA, May 23 (Reuters) - Some 3,400 Eritrean families who were displaced nine years ago during a border war with Ethiopia have returned home, the government has said.

The 1998-2000 border war with Ethiopia killed an estimated 70,000 people, and displaced 1.1 million Eritreans -- about a third of the Red Sea state's population.

"More than 3,400 Eritrean families who were displaced as a result of (Ethiopia's) war of aggression have returned to their native villages and other areas," an article on the Eritrean Information Ministry's Web site, shabait.com, said late on Tuesday.

As part of a 2000 peace deal, the two countries agreed to accept the final and binding ruling of an independent boundary commission on where the border should be.

Ethiopia initially rejected the commission's April 2002 decision, while Eritrea demanded the ruling be accepted without compromise.

Ethiopia has since said it would accept the ruling in principle, but wants talks first on how to implement it. Eritrea refuses any discussion until implementation.

A decision by the commission last year to give both nations one year to demarcate the border has ratcheted up tensions, which have been exacerbated by a conflict in Somalia.

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