The alliance says troops have been seen leaving the area around Kosovo's capital, Pristina.

Journalists are also reporting seeing up to 150 Yugoslav army trucks crossing the northern border out of Kosovo.

Nato Secretary-General Javier Solana is expected to announce shortly that the withdrawal has justified a formal suspension of the 11-week bombing campaign.

The United Nations Security Council will then vote on a resolution allowing a peace implementation force into Kosovo.

Earlier, the alliance showed signs of impatience with Yugoslavia, saying there had been little obvious indication of the promised withdrawal, which was expected to begin three hours earlier.

Nato's Supreme Commander, Wesley Clark, telephoned a senior Yugoslav commander, urging him to press ahead with the withdrawal as soon as possible.

The alliance is monitoring the province both from the air, and from border checkpoints, manned by international non-uniformed personnel.

However, Nato says it has not attacked any Yugoslav targets since the withdrawal agreement was signed after 24 hours of talks on Wednesday night, and celebrations have been going on throughout Yugoslavia.

(Click here to see a map showing timetable of Serb withdrawal)

The agreement reached on Wednesday saw Nato making several concessions to the Yugoslav side.

The Serbs are now being given 11 days to withdraw completely from Kosovo.

The province has been divided into three zones, and by the end of Thursday, the Yugoslavs have to pull back from the northern zone.

Nato troops will go in immediately after the Yugoslav withdrawal, preventing a power vacuum that could be exploited by the Kosovo Liberation Army.

The BBC's Bridget Kendall: Goodbye waves from some of the Serb troops in Kosovo

There have been extensive contacts with the KLA to try to ensure it does not attack retreating Serb forces.

The alliance will also be watching closely to see that a ceasefire remains in effect.

Nato General Sir Michael Jackson warned that if the withdrawal timetable was breached, the agreement required the air operation to resume.

K-For poised to enter

The UN Security Council is on standby for an emergency session to vote on a resolution authorising an international peacekeeping force, K-For, to go into Kosovo.

China has said it wishes to table amendments to the motion, but BBC UN Correspondent, Mark Devenport, says it is not thought likely to veto the resolution once the air strikes have stopped.

Aside from a peacekeeping force, the UN resolution calls for the Kosovo refugees to return to the province, the disarming of the KLA, and an interim civilian administration for Kosovo under the UN.

General Jackson said a "robust military presence" would secure Kosovo for the refugees, but that bringing them home "will not be an easy operation".

The Pentagon has said nearly 4,000 heavily armed US troops are heading towards Kosovo, ready to begin the task of clearing mines and rebuilding bridges.

Some 17,500 Nato troops - one-third of the projected total force - are already on the ground in Macedonia.

Russian involvement in K-For is still under discussion, but the US Deputy Secretary of State, Strobe Talbott, said on Thursday that it would not be possible for Russia to have a separate sector in Kosovo.

Serb celebrations

Serbian talks delegate General Marjanovic (through an interpreter): "The policy of peace prevailed"

Crowds in Belgrade have been celebrating the signing of the withdrawal agreement with fireworks, car horns and bursts of gunfire.

State-controlled media said the war had been won by President Slobodan Milosevic.

Correspondents said the prevailing feeling was relief that the bombing was to end after 11 weeks of air attacks.

Similar reports of celebrations came from other big towns, including Nis and Novi Sad, which have seen some of the worst effects of the Nato bombing.

But residents of Pristina are reporting that Serbs have been rampaging through the streets of the provincial capital threatening to kill Kosovo-Albanians before they leave Kosovo.

Tough tasks to come

While Nato will deal with military issues, the UN has been given the massive task of setting up an interim civil administration inside Kosovo.

The UN is expected to handle policing and the return of refugees, and to call on the assistance of others, such as the European Union, in reconstructing Kosovo's shattered infrastructure and setting up new democratic institutions.

Insiders say the job will be one of the most difficult and challenging peacekeeping operations ever undertaken by the international community.

• Picture gallery: Serbian relief
• Serbians rejoice, claiming victory
• World media hails 'peace at last'
• Kosovo's Serb exodus
• K-For: The task ahead