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Military authorities in Belgrade say the train was crossing a deep river gorge when Nato planes attacked a nearby road bridge, severing electricity cables and cutting power to the train.
The Serbian military says the train was trapped on the rail bridge and was then hit by a second bombing run.
Two carriages were reported to have burst into flames and another two coaches thrown from the track.
Nato said the railway bridge was a vital supply line for Serbian troops in Kosovo - but there was no intention of hitting the train.
Spokesman Jamie Shea said: "Nato aircraft have struck a railway bridge at Grdelica, which is an important part of the supply lines for the Yugoslav military and security forces in Kosovo.
"The reports that we are receiving at the moment indicate that there was a train on or near the bridge at the time of the strike.
"I want to stress very strongly indeed that there was no intention whatever to cause damage to the train. Regrettably we cannot at the moment exclude the possibility of casualties."
Local government officials in Grdelica say nine people died and many more were injured.
Sources within the Yugoslav military say at least 16 people were injured and there are fears that the death toll could rise.
Country profiles
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(12 Apr 99 | Europe)
Nato presses ahead with campaign
(12 Apr 99 | Europe)
Analysis: A war that dare not speak its name
(10 Apr 99 | From Our Own Correspondent)
Institute for War and Peace Reporting
Serbian Ministry of Information
Nato
Kosova Press
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