BBC Correspondent Karen Coleman discusses the arrests in Bosnia (1'37")

They were seized following a gun battle early on Thursday morning.

The two men were named as Vlatko Kupreskic, who is charged with murdering a Muslim family and then burning down their house, and Anco Frundzija.

Kupreskic was shot three times in the shoulder, arm and leg, during a gun battle after resisting arrest and was taken to hospital, said a Nato spokesman.

Frundzija was taken straight to The Hague where he was placed in prison to await trial. Details of the charges against him have not been released.

The operation, which used Dutch marines and paratroops, took place near the town of Vitez, some 30 miles north-west of the Bosnian capital Sarajevo. No Nato troops were injured in the mission.

Javier Solana: detentions a warning to suspected war criminals

In Brussels, the Nato Secretary-General, Javier Solana, said the arrests sent a warning to all alleged war criminals still at large in the former Yugoslavia that they should surrender immediately.

"As has been the case throughout the IFOR and SFOR (peacekeeping) missions, we will not tolerate any behaviour by any party contrary to the peace agreement."

Mr Solana also thanked the troops for their "professionalism and dedication" in carrying out the action.