UN staff have been pulled out of the northern part of the flashpoint town of Mitrovica in Kosovo where two days of inter-ethnic clashes have left 31 dead.
Religious symbols are bearing the brunt of the violence
UN Secretary General Kofi Annan said the decision had been taken in view of worsening security in the Serb-controlled areas.
He was addressing a special session of the UN Security Council after the worst violence since the 1999 Kosovo war.
Mobs of angry Albanians set alight Serbian Orthodox churches on Thursday.
The attacks came as Nato announced it was sending another 1,000 troops to reinforce the 18,500 already there.
The Security Council has strongly condemned the violence - calling it "unacceptable" - and demanded that it stop immediately.
Mr Annan said it showed that, despite the progress, communities in Kosovo were not ready to accept multi-ethnicity.
He urged all sides to co-operate with the international presence in Kosovo.
But his message was aimed primarily at the Kosovo Albanian leaders, who - as the largest ethnic group - had a responsibility "to protect and promote the rights of all people within Kosovo, particularly its minorities".
After calls from Nato and the European Union earlier, the main Kosovo Albanian political parties issued a statement urging their supporters to call off the protests - but it appears to have gone unheeded.
Trouble first erupted in the divided city of Mitrovica after the drowning deaths of two Albanian children, blamed on members of the province's small ethnic Serbian community.
Flights in and out of Kosovo have been suspended and internal boundaries with Serbia have been closed.
The top commander of the Nato-led force in Kosovo, known as K-For, has authorised the troops to use force if necessary.
As attacks multiplied, angry demonstrators over the border in Serbia itself responded by burning several mosques.
A Serb Orthodox church in the heart of Pristina was the target of an attack on Thursday evening.
Earlier, Albanians managed to get past Nato peacekeepers to set fire to churches in Mitrovica and the town of Obilic, west Pristina, where about 100 local Serbs had to be evacuated.
Crowds of Albanians were also reported to be trying to storm a church being protected by Finnish peacekeepers in the central town of Lipljan.
Nato troops had to use tear gas against Albanian protesters seeking to march on the village of Caglavica, south of Pristina, for the second day on Thursday.
Serbia has accused both the UN and Nato of failing to protect Kosovo's Serbs.
Serbian Prime Minister Vojislav Kostunica has described the attacks as "planned in advance and co-ordinated... this was an attempted pogrom and ethnic cleansing" against Kosovo's Serbs.
KOSOVO: KEY DATES
24 Sept 1998: Nato issues ultimatum to Milosevic to stop crackdown on Kosovo Albanians
24 Mar 1999: Nato begins air strikes against Yugoslavia over Kosovo
10 June 1999: Air strikes suspended after Milosevic agrees to withdraw troops. UN approves peace plan for Kosovo, establishes K-for peace force
11 June 1999: Nato troops enter Kosovo
10 Dec 2003: UN unveils road map on conditions Kosovo must meet by mid-2005 for talks on final status
17 Mar 2004: Serbs and Albanians clash in the worst violence seen since 1999
He has called for a state of emergency to be imposed in Kosovo.
Mr Kostunica was addressing protesters in the Serbian capital Belgrade - a day after similar gatherings ended up stoning and burning mosques and other Islamic buildings.
The situation has sparked growing debate about how to resolve the status of the Kosovo province, says the BBC's Nick Thorpe.
The latest outbreak of violence has revived debate about the idea of partitioning Kosovo, with the area north of the River Ibar, which divides Mitrovica, falling to Serbia.
But it is an idea which is an anathema to the majority Albanian population and has also been rejected by the UN administrators of the province, our correspondent says.
MITROVICA: DIVIDED TOWN
1998 population: 48,500 Albanians, 8,100 Serbs, 11,300 others
Bridge 1 guarded by Serb "bridge-watchers"
K-For troops have usually kept bridge 2 open for Albanians to cross