If the death toll is confirmed, it would be the worst case of what the alliance calls "collateral damage" since the air campaign against Yugoslavia started in March.
Witnesses described a scene of devastation in the village of Korisa, with bodies lying dismembered and a row of about 10 tractor trailers on fire. The roofs of several houses had been destroyed by the blast. The bodies of two children were recognisable, as were two craters in the ground.
A villager named as Feriz Emini said he had been travelling towards Albania before the bombs hit. He said "many" people had been killed. "Everyone was sleeping," he said.
The Nato spokesman Jamie Shea declined to comment initially on the claim from the Serb authorities in Kosovo. "Nato does not strike anything which is not directly connected with fuelling the Yugoslav war machine," he said. But reports that Belgrade was busing Western reporters to the burning village strongly suggested Serbia was convinced by the claims of a Nato atrocity.
The biggest question was why so many people had been holed up in such a small space. Serbia said about 500 civilians had moved temporarily into the village after coming out of the woods where they had been hiding for 10 days. One woman said they had returned after striking a deal with the local Serb military commander.
Korisa appeared to have been chosen as a Nato target as it lies close to the main road between Prizren and Suva Reka. This area has been at the centre of Nato's recent air campaign, intended to drive Yugoslav forces from the Albanian frontier. The Serb authorities claimed there was no justification for the attack and that Korisa contained no military or police headquarters that could have made it, in Nato's eyes, a legitimate target.
The attack came in the course of Nato's busiest bombing raid over Yugoslavia. During Thursday night and yesterday morning, the alliance flew 679 flights over Serbia and Kosovo.
Nato has accused the Serbs of using the remaining Albanians in Kosovo as decoys, forcing them into compounds under bridges or in factories the alliance is thought likely to hit. The apparent disaster in Korisa follows the bombing of the Chinese embassy in Belgrade last weekend, which killed three reporters and plunged relations between Peking and the West into an unprecedented crisis. That, in turn, followed a series of blunders, including the bombing of a Serb train as it crossed a bridge near Leskovac on 12 April, which killed about 30 people, and an air strike two days later on a refugee convoy, also near Prizren, which killed about 75 Albanians.
If the number of dead from yesterday's strike rises above that it will be the worst disaster in the alliance's 52-day campaign. In spite of Nato protestations that it is not targeting civilians, and that the number of Albanians killed by Serbs is vastly greater, it is bound to increase international pressure for a halt to the whole campaign. Serbia, naturally, will be delighted that the alliance has once again shot itself in the foot. But Russia is bound to use the bloodshed to demand that Nato must stop the attacks on its Serbian ally.
The Kremlin's Balkan envoy, Viktor Chernomyrdin, said yesterday that he would return to Belgrade next week with "many proposals" for ending the crisis. He is expected to travel with the Finnish President, Martti Ahtisaari. Russia and Serbia are likely to press the West to accept the deployment of a lightly armed international force in Kosovo with a large Russian contingent - a deal unlikely to satisfy the West or the Kosovo Albanians.
In a sign that Britain's resolve has not cracked, the Prime Minister told BBC News Online: "Milosevic knows the air campaign is working. The last few days have been the most successful so far. Day by day, night by night, his war machine is destroyed."
In a move to put the United Nations at the centre of the Balkan peace effort, the UN secretary-general, Kofi Annan, said he would also be touring the frontline states next week, starting in Macedonia.
"I will be going to show my solidarity, and that of the entire UN, with the suffering of the Kosovo Albanian people and to assure them that all our efforts are directed to securing their safe and speedy return to Kosovo."
War in the Balkans,