The former presidents of Yugoslavia and Croatia had a secret plan to divide Bosnia between them, a key witness has told the International War Crimes Tribunal at The Hague.
Tudjman and Milosevic are said to have discussed the plans in Serbia
Ante Markovic, the last prime minister of the old federal Yugoslavia, said that Slobodan Milosevic and the late Franjo Tudjman drew up plans at a meeting in 1991 before the outbreak of war in the Balkans.
He was giving evidence at the trial of Mr Milosevic, who faces 66 charges of war crimes, crimes against humanity and genocide.
Cross-examining Mr Markovic on Thursday, Mr Milosevic denied that such a meeting with Mr Tudjman had ever taken place.
"Tudjman and Milosevic agreed to divide Bosnia," Mr Makovic told the court.
They had, he said, envisaged an enclave for Bosnian Muslims where they would be "left to live peacefully".
Mr Markovic also accused Mr Milosevic of playing an active role in preparing Bosnian Serbs for war along with Radovan Karadzic.
Mr Markovic, a Croat who was considered a liberal reformer, tried to pursue economic reforms in the former Yugoslavia in 1989-90 before the country plunged into violence.
He said he had told Mr Milosevic and Mr Tudjman he would do "everything in my limited power" to stop their plans for Bosnia and warned that they would result in bloodshed. But the leaders were indifferent to his warnings, he said.
The cross-examination was to continue on Friday.
The BBC's Geraldine Coughlan, at The Hague, says Mr Markovic's evidence is the first direct testimony the trial has heard regarding a plot between Mr Milosevic and Mr Tudjman.
Mr Markovic said he had got a tape of an intercepted conversation between Mr Milosevic and Mr Karadzic from the late Bosnian Muslim leader Alija Itzetbegovic in 1991.
Although it has been used as evidence before, the Court heard that the two leaders on tape were discussing the deployment of military units and arms shipments to the Bosnian Serbs.
Our correspondent says Mr Markovic's testimony is important for the prosecution who claim Mr Milosevic is responsible for the war in Bosnia by supporting Bosnian Serb forces.
Mr Milosevic denies helping them or exerting influence over the Bosnian Serb leadership.