The latest civilian casualties, on the 45th day of the bombing campaign, came as Belgrade sent out new signals that it might be ready to study the outline peace plan agreed this week by the leading Western powers and Russia.
But in London, Tony Blair ruled out any direct negotiation with the Serbian President, Slobodan Milosevic, whom he branded a war criminal who should be removed from power.
Last night, there were reports that Nato may have scored its most spectacular own goal of the war by hitting the Chinese embassy in Belgrade. News reports from the city said the embassy was on fire after being struck by Nato ordnance. There were said to be many casualties.China is a permanent member of the United Nations Security Council and a critic of the Nato operation. A military headquarters and a police building were also hit in last night's air raids. The attack followed three quiet nights in Belgrade.
The Nato attack in Nis, some 120 miles south-east of Belgrade, caused horrific scenes as what appeared to be cluster bombs ripped into an area near a hospital and a market. Serbia accused Nato of a deliberate attack on civilians. Last night, Nato in a statement admitted that during air raids using cluster bombs, civilian buildings were likely to have been hit by mistake.
Diplomats were last night hoping that the incidents would not disrupt efforts to find an agreed end to the war, even as the alliance's campaign of air strikes is being stepped up.
At the centre of the new peace drive is Russia, which has agreed to an armed military force in Kosovo operating under an interim United Nations administration. The US Deputy Secretary of State, Strobe Talbott, is making his second trip to Moscow in a fortnight, and Viktor Chernomyrdin, Russia's special Kosovo envoy, may be heading to Belgrade for fresh talks with Mr Milosevic. Igor Ivanov, the Russian Foreign Minister, will spend the weekend in Scotland for talks with Robin Cook, the Foreign Secretary.
From Belgrade, fresh hints emerged that the regime could be ready to accept a settlement. Serb media coverage has switched its focus from bombing to diplomacy, openly talking of "compromise" as the way to achieve peace. Nato interprets the more conciliatory language as a sign the bombing is increasingly effective.
Mr Blair himself was uncompromising in a CNN television interview yesterday. "I'm not sitting down and dealing with Milosevic," he said, setting himself at odds with President Bill Clinton, who has kept that option open. "For Serbia itself, I cannot see a future with Slobodan Milosevic as its leader," said Mr Blair, indicating that he expected the Yugoslav President to be indicted as a war criminal.
Officials now acknowledge that the force which moves into Kosovo - and whose exact make-up could be the most serious obstacle to a Nato deal with the Russians and the adoption of a UN Security Council resolution - will now need to be double, perhaps even treble, the 28,000 troops originally intended.