Humanitarian agencies have estimated that up to 300,000 people were displaced during the eight month crackdown on ethnic Albanian separatists.

Following Nato's decision on Tuesday to lift its threat of imminent air strikes, Secretary-General Javier Solana called for Western observers to be sent to the province immediately to verify that Serb troops are withdrawing.

Mr Solana said a Nato force would soon be despatched to the region to help protect the observers.

The BBC's David Eades in Brussels: Focus from air strikes to verification of withdrawal

Despite the withdrawal, Nato has agreed to extend its "activation order" which has put more than 400 allied warplanes on alert for possible raids against the Serbs.

President Clinton: ''We've still got to stay on the case''

The US President Bill Clinton has warned the Yugoslav leader, Slobodan Milosevic, that he could still face military action.

Mr Clinton welcomed the widespread withdrawal of Yugoslav forces from Kosovo, but said it was now up to Mr Milosevic to stay in compliance with the demands of the international community.

Kate Adie: A very fragile situation

A BBC correspondent in Washington, Richard Lister, says there is a deep sense of relief that American forces are not being drawn into a new Balkans conflict, although officials believe they have not heard the last from President Milosevic.

Security forces return to pre-crisis levels

Mr Solana: "The threat of force will stay"

Mr Solana said reports from observers on the ground and Nato reconnaissance flights showed most Yugoslav forces had withdrawn from Kosovo or returned to barracks.

A KLA soldier returns home to find her father's skeleton

"The security forces are returning to the level they were at before the present crisis began," he said.

Mr Solana said more than 4,000 special police units had left the province in the past 24 hours and checkpoints had been dismantled.

But he acknowledged that full and unconditional compliance with UN resolutions had not yet been achieved.

Secret police head sacked

In Yugoslavia itself, members of the government have portrayed the withdrawal as the logical conclusion of their own victory over the Kosovo Liberation Army (KLA) separatists rather than as a result of Nato pressures.

The BBC's Nick Thorpe in Belgrade: "General sense of relief in Yugoslavia"

But the BBC correspondent in Belgrade, Nick Thorpe, says there are indications of a power struggle connected to Kosovo.

On Tuesday, the head of the Serbian secret police, Jovica Stanisic, was unexpectedly sacked.

Mr Stanisic, described even by his enemies as capable and intelligent, had been President Milosevic's right-hand man throughout the 1990s.

Refugees: Going home as troops withdraw

The reasons for his fall are not yet clear, but he is believed to have opposed both the tough crackdown on ethnic Albanians during the summer and current steps to outlaw domestic media which are critical of the government.

Mr Milosevic averted an initial 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.