His remarks come as the Foreign Office announced the closure of the UK's embassy in Belgrade.

Mr Blair said: "Britain stands ready with our Nato allies to take military action," which he said would be directed to "avert a humanitarian disaster" for the people of Kosovo.

Tony Blair: "Britain stands ready to take military action"

Nato is continuing preparations for possible air strikes against Yugoslavia following the failure of crisis talks between US envoy Richard Holbrooke and the Yugoslav President Slobodan Milosevic.

Speaking in the Commons Mr Blair spelt out the human dimension to the crisis in Kosovo.

Blair: Prepared to take action on Kosovo

He said the 15-month conflict has already seen 250,000 Albanians made homeless and another 170,000 have fled abroad.

More than 25,000 people have been forced from their homes since the withdrawal of OSCE observers last week, he said.

Mr Blair said: "To walk away now would destroy Nato's credibility. It would be a breach of faith with thousands of civilians who took us at our word."

The BBC's Carolyn Quinn: "Unease across the parties about the increasing likelihood of action"

The prime minister warned that the potential consequences of military action were "serious" but said: "The consequences of not acting are more serious still, for human life and peace in the long term.

Air strikes on the cards

"We must act to save thousands of innocent men, women and children from humanitarian catastrophe, from death, barbarism and ethnic cleansing by a brutal dictatorship."

Mr Blair added: "We have no alternative but to act and act we will, unless Milosevic even now chooses the path of peace."

Cross-party backing

Leader of the opposition William Hague supported the government's readiness to act but asked the prime minister for assurances that the UK was not preparing to involve itself in a ground war in the region.

William Hague: Fears a ground war in the Balkans

Mr Hague said President Milosevic was solely responsible for the suffering in Kosovo and called him an, "evil man with much blood on his hands".

He added: "May I express our wholehearted support for the British forces who may have to take part in this Nato action ... and the families of those who may have to risk their lives."

For the Liberal Democrats, Menzies Campbell said air strikes were being made necessary by the "sickening and uninhibited violence" used by Serbian forces against civilians.

And although the Lib Dems backed the prime minister's statement Mr Campbell hoped the political aim of any air strikes would be to bring President Milosevic back to the negotiating table.

Failed policies

But veteran Labour left-winger Tony Benn led criticisms of the statement saying similar polices had already failed in Iraq. He warned MPs that air strikes were bound to cause casualties.

Mr Benn also accused the prime minister of not giving the Commons sufficient time to examine the government's policy on Kosovo.

Mr Blair, he said, had treated the House, "as if it was just an audience for Newsnight".

After his Kosovo statement Mr Blair is due to fly to Berlin for a three-day EU summit.

The prime minister's official spokesman has said there is no reason why UK forces could not go into action while Mr Blair was out of the country.

Any decision to begin air strikes would be taken by Nato Secretary-General Javier Solana, after consultation with national leaders.