Troops from the Stabilisation Force (S-For) have blocked roads and helicopters are carrying out aerial reconnaissance.
Mr Karadzic is wanted by the United Nations tribunal in The Hague for alleged genocide and war crimes during the conflict in Bosnia between 1992 and 1995.
S-For spokesman Scott Lundy told BBC News Online that the focus of the operation was not Mr Karadzic's arrest.
"We've received a lot of information over the past five months about Karadzic's operational base and we're now looking to confirm that - and to try to find out more," he said.
"The only way to do that is to get people on the ground and helicopters up in the air - it's all geared towards hunting him and his associates down."
More details are expected to be released at a news conference on Thursday.
In hiding
People in the village of Celebici said dozens of armoured personnel carriers blocked roads to and from the village near the mountainous Montenegrin border on Wednesday.
It is the same spot where S-For tried unsuccessfully to catch Mr Karadzic earlier this year.
Mr Karadzic and military commander, General Ratko Mladic have been in hiding since 1996.
The Bosnian Serb authorities are blamed for refusing to surrender them to the UN tribunal.
The US Department of Justice has offered a reward a large reward for information leading to the two men's arrest.
Mr Karadzic is believed to move between remote areas of eastern Bosnia and the Yugoslav republic of Montenegro, where he was born, in the company of several bodyguards.
S-For says it wants to locate people suspected of helping Mr Karadzic, including bodyguards and family members, and to check possible hideouts and road routes he may be using.
UN war crimes prosecutor Carla Del Ponte has said wants Mr Karadzic to face a joint trial in October with his wartime associates Biljana Plavsic and Momcilo Krajisnik.