He said the people who had fled from Kosovo had become a tool in Serb President Slobodan Milosevic's war effort.
Mr Ashdown has spent five days visiting refugee camps in Albania and Macedonia as an envoy for UK Prime Minister Tony Blair.
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Speaking by video link to journalists at Thursday's Ministry of Defence briefing from Skopje, Macedonia, he said: "I have to confess that in the last three of four days I've found it literally unbearable.
"I've done a lot of tramping round the Balkans in the last five years, but I've heard things and seen things here which I've found terrible and terrifying - every single family I've spoken to with a horror story of its own tell.
"I have found it my worst experience and my worst trip to the Balkans."
The Lib Dem leader said he had predicted an exodus of Kosovo Albanians when Nato began air strikes against Serbia, but had failed to foresee the extent of the problem.
"I think we need to understand that clearly President Milosevic is using the refugees as an instrument of war and we have to win on that plane, just as we have to deny him victory on every other," he said.
"The scale of this took me by surprise. I was one of those who said he would attempt a final solution, but the speed, the veracity, the brutality with which he has delivered that has astounded me."
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Nato now had an overwhelming obligation to devote resources to helping the countries providing shelter to the refugees.
If the Alliance failed to carry this out President Milosevic would succeed in his aim of destabilising his neighbours.
"The fact of the matter is that Milosevic could widen the conflict by destabilising Macedonia without a shot being fired. We must stop that happening."
But Mr Ashdown reported strong backing among the refugees for Nato's offensive.
He said he had asked question every one he met the same question: Had Nato made the situation worse?
"I unanimously got back the same answer: 'No. Nato has given us the chance to make it better. We wish you had come earlier. We hope you will finish as quickly as possible.'"
Even the survivors from the refugee column hit by Nato missiles, whom Mr Ashdown also met, agreed.
"They understand this is war and accidents happen. They said to me, 'The difference is that Nato is not trying to kill us. If it does so, it does so by accident. Milosevic is trying to kill us.'"
Ground forces would have to enter Kosovo to bring a final resolution to the conflict, Mr Ashdown predicted, but not yet.
"My view remains what it's always been: it'll come to ground troops in the end, whether President Milosevic agrees or not.
"There is a moment when the risks will be acceptable for our troops to do what must be done, if that situation arises, but that moment is not now."
'Dying in Nato's hands'
(19 Apr 99 | UK Politics)
Kosovo: A long way to go
(13 Apr 99 | UK Politics)
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