William Walker, the American head of the mission, said his observers had been threatened by Serb police after they tried to reach the latest flashpoint in the town of Podujevo on Christmas Eve.
"I became more concerned about the security of my people after yesterday's violence," Mr Walker said. He said he feared the violence would worsen and that Serbia would not fulfil its pledge to guarantee the safety of the international observers.
Kosovo's crumbling truce appeared to collapse entirely on Christmas Eve after Serbia sent about 100 tanks into Podujevo in search of Albanian fighters from the Kosovo Liberation Army, the pro-independence guerrilla movement.
The KLA killed a Serb policeman earlier this week. Yesterday, a six- year-old Albanian girl was reported killed by Serbian forces. At least nine people were reported killed and two wounded in fighting on Thursday between Serbian forces and the separatist KLA.
The KLA said, in response to the assault, it regarded the truce as over. "The KLA will not stay with arms crossed, [but] will attack and defend itself," it said in a statement to the province's Albanian- language media.
Fighting in Kosovo between local Albanians and the Serbian authorities started in spring. It slowed in October after Western powers threatened Serbia with air strikes if it did not halt an offensive that drove hundreds of thousands of Albanian civilians from their homes.
The Organisation for Security and Co-operation in Europe then deployed the observers, pending expected talks on autonomy for Kosovo, which show no sign of taking place.
The European Union envoy on Kosovo, Wolfgang Petritsch, confirmed yesterday that "villages close to Podujevo are [being] attacked by heavy artillery", and he warned Serbia that the West "will not tolerate an excessive use of force by the Yugoslav army" in the province.
Nato's Secretary-General, Javier Solana, said the Serb offensive was in "clear violation of the commitments" undertaken in October by Belgrade.
Serbia's president, Slobodan Milosevic, may be hoping that the West will not act at a time when its leaders are preoccupied with Iraq.
There are 600 international monitors in Kosovo. The number was expected to rise to 2,000 in January. A Nato force of 1,800 soldiers is stationed in neighbouring Macedonia to rescue them if needed.Reuse content