Nato's secretary-general has expressed concern over a decision by Azerbaijan to pardon an army officer convicted of the brutal murder of an Armenian.
Ramil Safarov hacked a man to death with an axe in Hungary in 2004 and was imprisoned there until last week, when he was extradited to Azerbaijan.
He was expected to serve out the rest of his life sentence, but was instead promoted, and given a flat to live in.
The Armenian parliament has now formally suspended ties with Hungary.
Azerbaijan and Armenia have been locked in a bloody conflict over the disputed border territory of Nagorno-Karabakh for more than two decades.
Tens of thousands of people were killed in the early 90s before a tenuous ceasefire was agreed.
Speaking during a visit to Armenia, Nato Secretary-General Anders Fogh Rasmussen said the crime "should not be glorified".
He said he was "deeply concerned" by Azerbaijan's decision to release Safarov.
"The pardon damages trust and doesn't contribute to the peace process," he said.
About 1,000 Armenian protesters demonstrated as Mr Fogh Rasmussen arrived in the country - they were calling for Nato condemnation of Azerbaijan's actions.
Speaking at a joint news conference following talks with the Nato chief, Armenia's President Serzh Sarkisian said that "making a hero out of a criminal is unacceptable".
"Azerbaijan's shameful act seriously endangers the security of the entire south Caucasus," he said.
Mr Fogh Rasmussen is due to visit Azerbaijan on Friday.
International criticism and concern has been growing following the release of Safarov, and there are increasing fears of a return to war.
Suspending ties with Hungary in an extraordinary session of parliament, the Armenian government urged other countries to "condemn the deal concluded between Azerbaijan and Hungary".
A week before Safarov's release, there were reports that the two countries were in talks over a loan from Azerbaijan to Hungary of 2-3bn euros ($2.5-3.8bn; £1.6-2.4bn).
Hungary's prime minister has denied any secret deal and insisted that his country acted within international law.
Armenia's president has said his country would be ready if war were to break out between the two.
President Serzh Sarkisian said, in quotes carried by the AFP news agency: "We don't want a war, but if we have to, we will fight and win. We are not afraid of killers, even if they enjoy the protection of the head of state."
At the weekend hundreds of Armenians protested outside Hungary's consulate in the capital Yerevan, burning Hungarian flags and pelting the mission with eggs.
The Hungarian authorities said they had returned Safarov to his homeland only after receiving assurances from the Baku government that his sentence would be enforced.
Ramil Safarov was given a hero's welcome on his return to Azerbaijan last week.
As well as an official pardon from President Ilham Aliyev, he was promoted to the rank of major, given a flat and all the pay he had lost since his arrest eight years ago.
Russia, which has been involved in efforts to defuse the so-called frozen conflict between Armenia and Azerbaijan, said: "We believe that these actions of Azerbaijani as well as Hungarian authorities contradict internationally brokered efforts, of the OSCE's Minsk group in particular, to ease tensions in the region."
The co-chairs of the Minsk group expressed their "deep concern and regret for the damage the pardon and any attempts to glorify the crime have done to the peace process and trust between the sides".
The European Union also called for calm.
Safarov killed Armenian soldier Gurgen Markarian at a military academy in Budapest in 2004, where both servicemen attended English-language courses organised by Nato.
During his trial in Hungary, Safarov said that the Nagorno-Karabakh war and insults from the Armenian officer were at the root of his actions.