Stoltenberg said he regretted the decision to create a professional army of 5,000 troops, hailed by many Kosovo Albanians as an assertion of statehood.

Peacekeeping forces led by NATO have guarded Kosovo since it broke away from Serbia in a bloody war in 1998-99, but Stoltenberg said that the 4,000-strong mission would now have to be reassessed.

"NATO supports the development of the Kosovo Security Force under its current mandate. With the change of mandate, the North Atlantic Council will now have to re-examine the level of NATO's engagement with the Kosovo Security Force," Stoltenberg said.

Belgrade has condemned the move, voicing alarm for the safety of 120,000 Serbs living in Albanian-majority Kosovo.

NATO's KFOR mission, which is more than 4,000 strong, down from a peak of 50,000 in 1999, has been deployed in Kosovo since the end of the 1998-99 war, which left more than 13,000 dead.

"All sides must ensure that today's decision will not further increase tensions in the region," said Stoltenberg, calling on "responsible political actors" to focus on dialogue.

"I reiterate my call on both Pristina and Belgrade to remain calm and refrain from any statements or actions which may lead to escalation."

Kosovo and Serbia have struggled to make progress in faltering EU-led talks to normalise their ties.

The relationship took a serious plunge last month after Kosovo slapped a 100-percent tariff on Serbian goods in response to Belgrade's attempts to undermine it on the world stage.

Serbia has blocked Kosovo from various international organisations, including the United Nations, and also lobbied foreign governments to revoke their recognition of its statehood.

The standoff has alarmed many Western European states who fear the delicate balance of peace in the Balkans could be undermined.