Residents in Halgan told the BBC they had heard a huge bang followed by a heavy exchange of gunfire.
The AU mission (Amisom) has confirmed the attack but says the "enemy was successfully repulsed".
Amisom supports the government as it fights to regain control of the country from al-Shabab.
In a series of tweets it has said its soldiers, alongside troops from the Somali army, "drove back the attackers who are now on the run with the joint forces in pursuit".
Ethiopia is one of five countries contributing troops to the 22,000-strong mission and this is the first time an Ethiopian-run Amisom base has been attacked.
In January, al-Shabab targeted a Kenyan base in el-Ade, southern Somalia.
It said it had killed more than 100 soldiers but the Kenyan authorities have not confirmed the death toll.
Al-Shabab has also attacked Amisom bases run by troops from Burundi and Uganda.
Ethiopia base in Somalia `attacked by al-Shabab`
09 June 2016
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Somali Islamist militant group al-Shabab says it has killed more than 40 Ethiopian soldiers in an attack on an African Union base in central Somalia.
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