Steve and a second Briton, who had both worked for Feed the Children, are under house arrest in Travnik, apparently because the Muslims suspect them of spying. Some reports say they are also accused of gun-running and demanding money for ferrying civilians out of the area, the scene of fierce fighting between the Muslims and their former Bosnian Croat allies.
The BBC report said Steve looked in reasonable health, with no visible signs of injury, torture or malnutrition.
The men were named by some reports as Steve Pinnock and Linden Foster, although officials would not confirm that. The Press Association news agency reported that Mr Pinnock is thought to come from the Braintree area of Essex, but that his family are said to live in Dorset. Mr Foster is said to be from Potters Bar, Hertfordshire.
In June, the two were dismissed as aid workers by Feed the Children, a British charity based in Reading. One man was on a short-term contract while the second, a freelance photographer, joined its team as a volunteer. Both had expressed sympathy for the Muslim cause and were thought to have joined the fight.
The families of the men, who are both in their thirties, told the Foreign Office two weeks ago that they had not heard from them. They had begun working for the charity in May, delivering aid to hospitals, children's homes and people trapped in enclaves. They sometimes travelled with a United Nations escort of British peace-keepers.
For the first five weeks or so the men 'were doing very good work' in a dangerous area, said Peter Annereau, of Feed the Children. Then they began working to their own agenda, failing to file reports and to deliver aid to its intended destination. 'Possibly they got involved,' Mr Annereau said.
'They also began giving lifts to people eager to get out of the war zone. It's very difficult. If you come to a Croat checkpoint and you have six Muslims in the back you are not seen to be impartial.'
The men were said by the BBC to be concerned that, with only one box of ammunition left, a group of Muslims would be massacred by the Croats, and that they had used the charity's Land Rover to smuggle ammunition across the front line.
Their action could endanger the work of aid agencies - both the Serbs and Croats harbour suspicions about food shipments. Last night Bosnian Croats outside Mostar demanded they be allowed to search a convoy for Muslims.
Mr Annereau, the charity's procurement manager, said it was important for workers to remain impartial. 'It might well have jeopardised our operation. It could well have created an additional danger. They allowed their hearts to rule their heads.'
The agency wrote to the pair in June, dispensing with their services. At that point they disappeared in a Feed the Children Land Rover. Some time later they went to Zagreb, contacted the charity and offered to return it. Later still, they appeared in Zenica and British troops there retrieved the vehicle.
The Foreign Office played down a report in yesterday's Daily Express that the men were being held 'under threat of death' and living on bread and water. 'We presume they are not in any immediate danger,' a spokesman said.
He added that the British embassy in Zagreb was trying to find out where the men were and if they were being held against their will. He said that if charges had been laid against the two, they might have to stand trial. 'They seem to have gone back in of their own accord, for their own devices.'
Peace plan needs muscle, page 10
Letters, page 27
Destroying Yugoslavia, page 28