Sudan has denied Chad's accusations that it backs the rebels led by the United Force for Change, reports the BBC.
Chad also warned that it might expel refugees who have fled the conflict in Sudan's Darfur region, the report said.
"We have taken the decision to break our diplomatic relations with Sudan today and to proceed to close our frontiers," Chadian President Idriss Deby told a rally in N'Djamena.
A U.N. envoy from France was quoted as saying the rebels came from Darfur. France has about 1,350 troops in its former colony.
The rebels want to bring down the regime of Deby, claiming the president is a dictator.