Venezuelan President Hugo Chavez has said his country will sever diplomatic ties with Colombia over claims he harbours militants.
"We have no other choice but to totally break our relations with our brother nation of Colombia," he said on TV.
Bogota says it has evidence Venezuela provides a haven for guerrillas - a charge Caracas denies.
Mr Chavez said the US was using Colombia to undermine his country's regional integration efforts.
A US official was quoted by AFP news agency as saying Venezuela breaking ties with Colombia was not a "proper way" to raise concerns.
Colombia earlier recalled its ambassador and formally complained to the Organization of American States (OAS).
It submitted photos and maps which, it said, were proof that some 1,500 Colombian rebels were sheltering at numerous camps inside Venezuela.
The issue over whether Venezuela has rebels on its territory has dogged ties between the two South American nations for the past eight years.
The latest exchange plunges bilateral relations to a new low and leaves Juan Manuel Santos who takes over as Colombia's president from Alvaro Uribe in two weeks with a very difficult situation to handle, says the BBC's Jeremy McDermott in Bogota.
The Venezuelan president made his announcement while standing next to the Argentina football coach, Diego Maradona, who was visiting Caracas.
Mr Chavez said that he was acting "out of dignity".
"I have ordered maximum alert on our border, maximum vigilance on our border which we do take care of," he was quoted by the Reuters news agency as saying.
Earlier on Thursday, in a lengthy and impassioned speech in Washington, the Colombian ambassador to the OAS, Luis Alfonso Hoyos, showed maps, photos and videos which he said proved that Marxist rebels had 39 camps in Venezuela and that top guerrilla commanders were resident there.
"Facts over recent weeks show that real risks are materialising due to the consolidated, active and growing presence of these terrorist groups in Venezuela," he said.
Colombia demanded that Venezuela fulfil its international obligations to fight terrorism and that it allow an international commission to visit suspect sites.
The Venezuelan ambassador to the OAS, Roy Chaderton, ridiculed the Colombian evidence, saying that the photos and videos could have been taken anywhere and that if visits were to be organised, why not allow an international commission to see the US military bases on Colombian soil.
Mr Chaderton said the Colombian accusations were a lie.
Lula says he will mediate dispute between Chávez and Uribe
Venezuelan president Hugo Chávez broke ties with Colombia on Thursday (23). Presidential advisor Marco Aurélio Garcia is optimistic about a reconciliation.
Brazilian presidential advisor for International Affairs Marco Aurélio Garcia expressed regret on Thursday (22) that Venezuela has decided to break diplomatic relations with Colombia. Garcia said Brazil will negotiate with both countries a solution to the dispute. Garcia said, without providing details, that President Luiz Inacio Lula da Silva called the presidents of Venezuela, Hugo Chavez and of Colombia, Alvaro Uribe, to discuss the issue.
"I think it's unfortunate, but we are convinced that as soon as Colombia establishes its new government, these things will be resolved immediately. Brazil is helping and will continue to help by speaking to both parties", said Garcia.
On Thursday (22), Chavez announced that Venezuela was breaking ties with neighboring Colombia. According to the Venezuelan president, the altercation occurred because Colombia has asked the Organization of American States (OAS) to form an international commission to investigate the alleged presence of Colombian guerrillas in Venezuelan territory.
For Marco Aurelio Garcia, once the new Colombian president, Juan Manuel Santos, takes office in August, the relationship between the two countries should improve. "We understand that both governments are willing to reconcile in the near future, perhaps after president Santos’ inauguration", said Garcia.
"I think tensions have been festering in the region. Brazil has tried on several occasions, with some success, to reduce this tension. Maybe it's time, after Santos takes office, for us to create an environment to facilitate reconciliation in the long run”, said Garcia.