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It said they were living in far worse conditions than they should be, given the resources available.
Oxfam said camps in Macedonia were dirty and overcrowded, while those in Albania were under increasing pressure because additional ones were not being built quickly enough.
It said the aid effort lacked co-ordination, and the United Nations refugee agency needed to provide more effective leadership.
The comments came as two Serb soldiers held as prisoners of war by the US military in Germany were released.
An official with the International Committee of the Red Cross in Hungary said the two men had been flown to the Hungarian capital, Budapest. They were due to be handed over to the Yugoslav authorities later on Tuesday.
The two soldiers were captured in Yugoslavia by the rebel Kosovo Liberation Army, and taken to Albania where they were handed over to the US military.
Search for endgame
The releases coincided with increasing speculation about splits within Nato and an intensification of diplomatic efforts to find a solution.
The president of Finland, Martti Ahtisaari, is to step up attempts to secure a peace agreement in his new role as a leading negotiator for the European Union.
He is due to meet the Russian special envoy, Viktor Chernomyrdin, and the American Deputy Secretary of State, Strobe Talbott, on Tuesday.
Mr Ahtisaari said it was too early to say when he would meet the Yugoslav President, Slobodan Milosevic.
Finland is due to take over the EU Presidency, but is not a member of Nato.
Correspondents say that despite Mr Ahtisaari's support for air strikes, his position as president of a non-Nato country could make him palatable to Belgrade.
The German Chancellor, Gerhard Schröder, said on Tuesday that it would be "unthinkable" to launch a Nato ground offensive to try to end the war in Kosovo.
The BBC Brussels correspondent says Nato is showing the strain of its prolonged campaign, with Britain still pushing for the deployment of ground troops in Kosovo.
Greece and Italy have both suggested a 48-hour pause in the Nato bombing of Yugoslavia.
Protests in Serbia
As the Nato strikes entered their 56th day, Montenegrin TV reported that several protests had taken place in Serbia against the deployment of local soldiers in Kosovo.
The television report said the protesters, many of them women, had gathered in the Serbian towns of Aleksandrovac and Krusevac to demand the return of troops from the province.
The report said women had chanted "we want sons, not coffins", and had demanded that local leaders take action.
Correspondents say the Yugoslav authorities have increased conscription into the army since the bombing raids began, but that many men try to avoid being called up.
(Click here to see a map of the most recent Nato strikes)
Nato bombed a bridge over Yugoslavia's main motorway just north of Nis on Monday night. Several central and southern towns were also hit. Planes targeted several fuel depots during the day on Monday.
(click here to return)
Other top stories
![[ image: width=300]](/olmedia/345000/images/_346561_strikes18_05.gif)
Europe Contents
Country profiles
Blair's pledge to refugees
(18 May 99 | UK)
Anti-war unrest in Serbia
(18 May 99 | Europe)
Behind the scenes with the KLA
(18 May 99 | Europe)
Ground troops or no ground troops?
(17 May 99 | Europe)
EU backs new Kosovo diplomacy
(17 May 99 | Europe)
US and Nato divided on ground troops
(17 May 99 | Europe)
Serbs turn back refugee train
(17 May 99 | Europe)
Freedom in sight for Serb PoWs
(17 May 99 | Europe)
Analysis: Waiting for the Apaches
(17 May 99 | Europe)
Ground troops: How it could be done
(22 Apr 99 | Kosovo)
Nato
Serbian Ministry of Information
Kosovo Crisis Centre
UNHCR Kosovo news
Eyewitness accounts of the bombing
OSCE
Oxfam in Kosovo
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