American and French peacekeepers were told to fire their weapons in defence if attacked at border posts on Kosovo's northern boundary with Serbia, a day after the crossings were set ablaze by Serbs armed with firebombs, a Nato spokesman said.
There have been days of mounting tension between ethnic Albanians and minority Serbs after Kosovo prime minister Hashim Thaci ordered special police units to take over two disputed border posts that were previously manned by Serb members of the police under EU supervision.
One Kosovo policeman died in the operation.
"We are in command of those places," Nato spokesman Captain Hans Wichter said. "If we are threatened, we have the right to use weapons."
He said the area was "declared a military zone", meaning the alliance makes all decisions related to security.
Nato troops were attacked late on Wednesday by machine guns and anti-tank rockets as they moved to secure the border posts, the top Nato commander in Kosovo, Major General Erhard Buehler, said.
No injures were reported. They took control of the border posts on Thursday.
Mr Thaci's goal in trying to take over the crossings was to enforce Kosovo's ban on goods from Serbia in the Serb-run area, which has rejected Kosovo's 2008 independence. Serbs object to Kosovo customs posts being set up on the crossings with Serbia because it weakens Serbia's claim over the territory and its influence in the Serb-dominated region.
Maj Gen Buehler is leading efforts to reach an agreement that would ease tensions between the two sides. But late on Thursday the military alliance said no breakthrough was in sight and that talks with officials from Serbia and Kosovo would continue.
Serbia's Kosovo negotiator, Borislav Stefanovic, accused the Nato force in Kosovo - known as Kfor - of siding with Kosovo's ethnic Albanians and helping them establish Pristina's rule as an independent country in the territory that Serbia considers its own.