Mr Demaci told a news conference he had taken the decision to resign because he feared the ethnic Albanian negotiating team was preparing to sign a peace agreement on Kosovo against his advice.

The chairman of the European security organisation, the OSCE, Knut Vollebaek, said after meeting Kosovo Albanian leaders that they were "likely" to sign the peace plan when talks resume on 15 March.

He added that continuing fighting in Kosovo showed the necessity of a Nato deployment - a key element of the peace plan opposed by Belgrade.

Jacky Rowland: "He was faced with the decision on going, or being pushed"

Mr Demaci said the deal as it stood "will not liberate Kosovo from Serbian slavery." The proposed plan was "not even close to what we have fought for and we are fighting for."

His announcement came shortly after the KLA announced that its senior official leading the ethnic Albanian delegation at the talks in France, Hashim Thaci, had been named as prime minister of an interim government to be established in Kosovo after a settlement.

'Out of touch'

Preparations continue for international peace monitoring team

Mr Demaci had gained wide respect among Kosovar Albanians because he spent more than 20 years in Serbian prisons for his political beliefs.

But the BBC Correspondent in Belgrade, Jacky Rowland, says he is seen as out of touch with the new, younger leadership of the KLA, which is demonstrating considerable pragmatism in its dealings with the international community.

Mr Demaci refused to travel to last month's peace conference in Rambouillet and pressed the KLA not to go either.

Rumours that the KLA leadership was preparing to sign the agreement were seen as the last straw for the veteran leader since the agreement is not reported to include a referendum on independence.

Diplomatic moves

Tensions remain high in Kosovo

International officials in Kosovo say as a result Mr Demaci was faced with a decision of jumping or waiting to be pushed.

On Monday Mr Vollebaek was told by the Yugoslav President, Slobodan Milosevic in Belgrade that he was not prepared to drop his opposition to a key element of the international peace plan - the deployment of an international military force in Kosovo.

President Milosevic insists the only tolerable international presence in the province is the OSCE's Kosovo Verification Mission (KVM), a communique issued by the official agency Tanjug said.

Renewed conflict

In Kosovo itself Serbian forces have renewed an assault against ethnic Albanian villages in the south of province close to the border with Macedonia.

Peter Biles: "There has been continuing tension"

The Associated Press news agency said the Serbs appear to be trying to cement control of a 15-kilometre stretch of border territory, along the main road from the town of Kacanik south towards the Macedonian capital, Skopje.

The agency said the aim of the operation was either to prevent Nato troops entering Kosovo or to stop refugees leaving.