The Justice Ministry warned that the agreement on transforming the former rebel KLA army into a 5,000-strong civilian force would harm peace and security in Kosovo.

It said the accord sought to "legalise the action of terrorist bands and the criminal KLA''.

The BBC's Jon Leyne in Pristina:" Nato is glad to have avoided a potentially disastrous breakdown in relations with the KLA."

The ministry branded the deal a violation of Yugoslavia's sovereignty which it would "resist with all its means and at any price".

Russia also criticised the plan which will see the KLA transformed into the Kosovo Protection Corps.

The foreign ministry said the ethic Albanian organisation should have been totally dissolved.

It said the agreement created a paramilitary organisation that complicated the process of finding a political settlement in Kosovo.

Weapons

The KLA signed the deal on its demobilisation and demilitarisation on Monday under intense pressure from Nato and the United Nations.

More than 10,000 weapons have been handed in to Nato

The civilian body, led by former KLA leader General Agim Ceku, will operate under the supervision of the commander of the Kosovo peacekeeping force K-For.

It will be restricted to 200 weapons for guard duties.

Nato Secretary-General Javier Solana hailed the agreement as a "milestone for the ongoing peace implementation efforts" in Kosovo.

He said all the weapons the KLA had been required to hand over were now in storage sites under K-For control.

And he warned that anyone violating weapons bans would be "dealt with severely".

Suspicious

But a senior Serbian official said the new force was "very, very suspicious" and that the accord violated the UN Security Council resolution which put a formal end to the 11-week Nato bombing of Yugoslavia.

Javier Solana: ''A milestone''

"A few thousand Albanian terrorists are now on the payroll of the UN," Serbian Deputy Information Minister Miodrag Popovic said.

The ethnic Albanian KLA waged an armed campaign against Serb rule in Kosovo for more than a year.

About 200,000 Serbs and other non-Albanians have left Kosovo in the last three months fearing reprisals following the withdrawal of Yugoslav forces from the province.

Minorities

The UN administrator for Kosovo, Bernard Kouchner said the corps would include representatives of Kosovo's minorities including Serbs.

He said a transition period of at least 60 days would be necessary to get the new corps fully operational.

The KLA was originally due to have been disbanded at midnight on Sunday, but discussions became deadlocked over the role of the new body.

KLA leaders wanted the force to be the basis for a new army of an independent Kosovo and were demanding the right for more members to bear arms.

But Nato insisted on a lightly-armed civil defence body restricted to humanitarian work and disaster relief.