New York Times correspondent Nick Wood told CBS Radio News it was "the most serious outbreak of violence since the end of the war in Kosovo" in 1999.
Arsonists on Thursday torched several Serb houses in Obilic, an ethnically mixed town west of the provincial capital of Pristina, forcing U.N. police and NATO troops to evacuate dozens of Serbs.
Some of the houses, which had housed some of the few remaining Serbs in Pristina, were "burned to a shell," Wood said.
Bracing for more trouble, NATO mobilized extra units Thursday, sending about 350 troops to the province, mostly from Bosnia and Italy, to beef up the 18,500 international peacekeepers now in Kosovo.
The breakdown in order illustrated the failure of U.N. and NATO efforts to snuff out ethnic hatreds and set the province on the path of reconciliation some five years after a NATO air campaign stopped a Serb crackdown on the independence-minded Kosovo Albanian majority.
NATO played down the prospects of renewed conflict, saying the alliance and the United Nations were committed to keeping the peace and quelling tensions.
"I don't believe there is a possibility of a war. We will do what is necessary to restore and uphold law and order," NATO spokesman Jamie Shea said Thursday.
Serbs see the U.N.-run province as their ancient homeland. Ethnic Albanians want independence from Serbia-Montenegro. Hatreds between the two sides continue to boil over into violence.
All the deaths came in gun battles, riots and street fighting on Wednesday. Evidence of the violence was still visible: Smoke billowed from Serb houses set ablaze in the ethnically mixed town of Kosovo Polje and burned out cars littered the streets of Pristina.
The clashes started in the ethnically divided city of Kosovska Mitrovica after ethnic Albanians blamed Serbs for the drowning of two of their children and began rampaging in revenge.
Melees broke out elsewhere in the U.N.-run province, including several enclaves where Serbs have eked out a sheltered existence since the end of the war.
NATO-led peacekeepers and Romanian police units moved in, firing tear gas, rubber bullets and stun grenades to stop ethnic Albanians from surging across a key bridge toward the Serb side of the city, where another crowd had gathered.
The new tally of casualties Thursday was given by Angela Joseph, a spokeswoman for the U.N. police. Sixty-one police officers, including 40 members of the U.N. special police unit, were injured during the clashes, she said.
Separately, Lt. Col. Jim Moran, spokesman for the NATO-led peacekeepers, said that 17 peacekeepers were injured.
About 100 Serbs were evacuated from their buildings in the center of Pristina and other communities by police and NATO-led peacekeepers, officials said. Some of the apartments evacuated by the Serbs and the cars they left behind were torched by arsonists.
"Serbs here are being killed in their houses," Father Sava, a Serbian Orthodox priest in Kosovo, said by telephone from Obilic. He said at least 15 Serb homes had been torched and that the town's church was on fire.
Senior international officials appealed for calm.
"I urge all ethnic communities in Kosovska Mitrovica and in the rest of Kosovo to avoid further escalation, to act with calm and to refrain from demonstrations and roadblocks," NATO Secretary-General Jaap de Hoop Scheffer said.
"The escalating violence must end. It threatens the process of democratization and reconciliation in Kosovo," said U.S. State Department spokesman Adam Ereli.
The unrest spilled beyond Kosovo's borders.
In Belgrade, the capital of Serbia-Montenegro, demonstrators set the city's 17th century mosque on fire after clashing with police trying to guard the building. The protesters demanded that the government act to protect their Orthodox Christian kin in Kosovo from attacks by the province's predominantly Muslim ethnic Albanians.
Serbia's senior official for Kosovo, Nebojsa Covic, accused NATO of a "dramatic inability" to protect Serbs. "The entire concept of multiethnic life in Kosovo has now collapsed," he said.
Trouble began amid reports that Serbs in a village near Kosovska Mitrovica set a dog on a group of ethnic Albanian boys, sending three — the oldest 12 — fleeing into an icy river.
After authorities recovered two bodies — and searched for a third — ethnic Albanians and Serbs gathered near the bridge over the Ibar River that divides Kosovska Mitrovica, long the flashpoint of tensions in the province. The two sides traded insults, threw rocks and charged at each other before gunfire rang out.
The province itself is U.N.-administered but remains part of Serbia-Montenegro, the successor state to Yugoslavia, with its final status to be decided by the United Nations. But the lack of movement on the status question has left postwar tensions boiling.
The Kosovo war ended in mid-1999 after the NATO air campaign drove Serb-dominated troops loyal to former Yugoslav President Slobodan Milosevic out of the province and stopped a crackdown on the independence-minded Kosovo Albanian majority.