The Alliance statement said the village was a "legitimate military target" and that it had identified Serb forces dug into positions there.

Nato said it deeply regretted any accidental civilian casualties that were caused by the attack.

Nato began its investigations following Serb reports that eight cluster bombs had fallen on the village during raids by Nato aircraft.

Nato said, however, that the village was not hit by cluster bombs.

Diplomatic Editor Brian Hanrahan: "The allegation is that this is Nato's biggest mistake of the war so far"

"Military equipment including an armored personnel carrier and more than 10 pieces of artillery were observed at this location," the Nato statement said.

Meanwhile the United Nations Security Council has issued a formal statement in response to Nato's mistaken attack on the Chinese embassy in Belgrade.

It expressed "profound regret" for the attack, but the statement was not as strongly worded as the Chinese had originally called for.

Grieving relatives

Yugoslav officials insist there were no military targets in the Korisa area.

Pictures shot by foreign television crews showed a number of charred bodies - including those of at least two children - smouldering buildings and burned out tractors.

Grieving survivors remained in the area with around 50 women and children huddled, weeping in the cellar of a nearby house.

According to the Serbian authorities the majority of those killed and injured were women, children and the elderly. They say the victims were part of a convoy of 500 refugees travelling to Albania.

Jacky Rowland in Pristina: "Scenes of complete carnage"

BBC correspondent Jacky Rowland, in Pristina, said forensic work is being carried out on the bodies and body parts found at the scene to establish how many died in Korisa.

She says 79 bodies have so far been removed from the scene but Serb authorities say the final death toll could be higher.

The news of the devastation at Korisa came as Nato gave details of what it said was its heaviest 24-hours of bombing in the campaign against Yugoslavia so far.

(Click here to see a map of Thursday night's Nato strikes)

The alliance says it has been increasing the frequency and force of its bombing in Kosovo, targeting the heavy armour of the Yugoslav military and special police units there, while taking all measures to avoid civilian causalities.

Nato warplanes attacked several targets in Serbia on Saturday, Tanjug news agency reported.

Explosions were reported by the Yugoslav state news agency, Tanjug, at Cacak and, 120km southwest of Belgrade, and Kraljevo, 150km south of Belgrade.

Tanjug also reported that villages near Kraljevo were attacked.

Nato says 40,000 soldiers and armed police remain in Kosovo

The Yugoslav Ministry of Security Forces said it was halting the troop withdrawal announced on Sunday, because Nato had rejected Belgrade's "gesture for peace".

Officials say Yugoslav forces would now remain in Kosovo, until Nato troops were withdrawn from neighbouring countries.

But Nato says it had obtained no evidence of any significant withdrawal of Yugoslav forces.

Fall-out clears

The diplomatic fall-out from the Nato bombing of China's embassy in Belgrade appears to be easing.

UN Correspondent Mark Devenport: "Slowly but surely watered down"

After repeated US apologies Chinese President Jiang Zemin and US President Bill Clinton held their first telephone conversation since last Friday's attack which Nato said was a result of using outdated maps.

The UN Security Council has expressed "profound regret and deep sorrow" for the attack.

BBC UN Correspondent Mark Devenport said the statement was issued after a week of bitter wrangling in which China's proposed text was diluted.

China's proposed statement had included condemnation of the bombing, calling it a "blatant encroachment on the sovereignty of a UN member".

UN Secretary General Kofi Annan has announced that he will visit Macedonia and Albania next week, to assess the needs of the refugees there, and to show solidarity with their suffering.

• UN failing Kosovo refugees - MPs
• Clinton phones Chinese president
• Picture gallery: Village bombing
• First Lady visits refugees
• Montenegrin president condemns Milosevic

(click here to return)