After the deadline passed, a spokesman for Mr Walker said he would be remaining in Kosovo.

The international observer was ordered to leave Yugoslavia after he blamed Serbian security forces for the killing of more than 40 ethnic Albanians in the southern Kosovo village of Racak last Friday.

The BBC's Paul Wood: "A Nato military build up is continuing"

Mr Walker had earlier been advised by the Organisation for Security and Co-operation in Europe (OSCE) to stay and ride out the storm.

Jorgen Grunnet, the KVM chief's spokesman, said he would be staying in Pristina.

"Mr Walker will be having a normal day tomorrow, meetings, briefings, trips to the field and so on," the spokesman insisted.

Mr Walker blamed Serbian security forces for the killings

There were indications that Belgrade might be willing to ignore its own expulsion order in an attempt to deflate the current confrontation with the West.

Nato's fighter-bomber aircraft have been put on a 48-hour alert since the Racak killings, and it has ordered more warships to the Adriatic Sea, in readiness for possible air strikes against Yugoslav forces.

Yugoslav Prime Minister Momir Bulatovic was reported to have said that he had not ruled out the possibility of a "new decision" on Mr Walker's expulsion.

Western diplomats, including OSCE chairman Knut Vollebaek and two key American Kosovo envoys, Macedonian Ambassador Chris Hill and President Clinton's special envoy James Pardew, had gone to Belgrade trying to strike a deal to avoid Mr Walker's expulsion and defuse the threat of Nato air strikes.

International pressure

International pressure was mounting on Belgrade to back down from its position as the deadline for Mr Walker's expulsion came and went.

Orla Guerin reports: The diplomatic effort has moved into high gear

US Secretary of State Madeleine Albright warned that international monitors would be pulled out if Yugoslav President Slobodan Milosevic did not reverse the decision to expel Mr Walker and allow monitors to operate unhindered.

The Racak massacre "had brought tensions to a razor's edge," she added.

And United Nations Secretary General Kofi Annan urged the authorities in Belgrade to defuse the present crisis.

Jacky Rowland reports: William Walker appears to be following the advice of his political masters

He said he did not detect any change in their position when he called on them to withdraw their expulsion order against Mr Walker and allow in the chief prosecutor for the International War Crimes Tribunal for Former Yugoslavia, Louise Arbour.

A BBC correspondent in Belgrade says that although there has been no official word, a deal is in the pipeline, according to a Yugoslav government source.

What happened at Racak?

The Serbs have been carrying out their own investigation in an effort to prove that the 45 people who died at Racak were killed in fighting, not a massacre.

A team of pathologists from Finland has gone to Kosovo to supervise forensic tests by the Serbs. It is reported to have begun x-raying some of the bodies to determine whether they were killed in a gun battle, or murdered in cold blood.

But ethnic Albanian politicians have expressed fears that the investigation still might not be impartial.

The OSCE has itself come under pressure to defend its belief that those who died were civilian victims. Serb officials have said the bodies had been re-arranged to make it appear that they were civilians, but that they were mainly guerillas of the Kosovo Liberation Army.

The European security organisation has published a report in response to Serb assertions, in which it concedes that some bodies were moved after death by relatives.

But it said that everything about the appearance of the victims suggested they were local peasants, not guerrilla fighters.