A meeting of ambassadors from the 16-allied nations in Brussels agreed to extend the "activation order" which is keeping over 400 allied warplanes on alert for possible raids against the Serbs.

Some fighting continued while talks were being held

"We have instructed our military to remain prepared ... and maintain forces," said Nato Secretary General Javier Solana.

He said the crisis was far from over and urged both sides in the conflict to seek a political solution.

Yugoslav President Slobodan Milosevic had until 1900 GMT to pull Serb troops and police out of Kosovo or face the threat of action.

Before the meeting the American envoy who helped negotiate the withdrawal, Richard Holbrooke, said he believed the Serbs had complied substantially with Nato demands.

'Troops are leaving'

Mr Solana said Serbian security forces had continued to withdraw from combat areas.

And more than 4,000 Serbian police had left the province in the last 24 hours.

Police checkpoints had also been removed.

The Serb withdrawal has led to thousands of ethnic Albanian refugees returning to their villages but thousands more remain in need of shelter.

About 300,000 people have fled their homes since the Serbs began their operation against ethnic Albanian separatists earlier this year.

Mr Milosevic averted a threat of air strikes earlier this month by signing an agreement with US envoy Richard Holbrooke, which committed him to withdraw his forces and allow the safe return of refugees.

The United Nations Security Council endorsed the agreement - although it fell short of authorising military action.