It is believed the man may have left a bar, perhaps drunk, and objected to the soldiers chatting to members of the Interior Ministry police, of which he was a member.

A Nato spokesman said the man was warned to drop his pistol six times in a number of languages, including Serbian, but he refused and fired.

Paratroopers from 1 Battalion returned fired, killing him instantly.

A journalist near the scene said: "I heard three shots, then the Paras nearby started shouting 'Contact, contact' and started running.

The BBC's Ben Brown in Pristina: "There are reports the man brandishing a gun was drunk"

"By the time I got there there were Paras swarming round the man. He looked in his late 30s or early 40s and was wearing civilian clothes."

Nato said the incident would be "thoroughly investigated" by military police.

A military source said the shot fired by the Serb missed the troops' heads by just "several feet".

He added that a Serb who witnessed the shooting praised the way the paratroopers handled the incident.

"The Serb said: `The British are gentlemen. If that had been Serb soldiers, 20 people would have been shot'," the source said.

Brigadier Freer with his Russian T-shirt

A Ministry of Defence spokesman said: "The rules of engagement are clear - Nato troops will take action to protect themselves where necessary."

Earlier, there were scenes of wild celebration as British tanks from 4th Armoured Brigade rolled into Pristina after a night of gunfire and civil unrest.

The first Warriors arrived at about 1000 BST. They are holding major road junctions and patrolling the streets.

But at Pristina airport things are going smoothly as the stand-off between British and Russian troops continues.

British barred from airport

On Sunday evening the Russians were still in control of the strategically important site.

Russian armoured patrol cars blocked the route into the southern part of the airport, close to where 17 British Jeeps and troop transporters were parked.

The roadblock was challenged twice by British armoured cars, which approached the Russians at speed.

But both times the Russians closed the gap and the British had to pull back, causing one of them to make an emergency stop.

Rapturous welcome for British soldiers

Commander of 5 Airborne Brigade, Brigadier Adrian Freer, personally challenged the Russians, telling them they had to clear the road, but they again refused to move.

"What the hell are you doing here? Get on to your commanders and get out of here now," he shouted at sentries.

But while the British were refused entry to the airport, Serb vehicles were let through with no restriction.

Some of these were reportedly stolen cars, and lorries carrying looted household goods and furniture, driven by Serb soldiers who laughed and jeered at the British.

A military source said: "This is the Russians messing us around and deliberately dragging their feet."

But UK Prime Minister Tony Blair and US President Bill Clinton are confident Nato's wrangle with Russia will be resolved.