Police searched a factory in the central Serbian town of Valjevo for fugitive Bosnian Serb general Ratko Mladic, a source in the office of the war crimes prosecutor said.
Mladic, the commander of the Bosnian Serb forces in the 1992-95 Bosnia war, was indicted in 1995 on genocide charges for the 43-month siege of Sarajevo and for orchestrating the Srebrenica massacre of about 8,000 Muslims.
Special police units entered the Vujic Valjevo window factory, a business believed to have been part of Mladic's support network.
"It is a part of an overall action to locate Ratko Mladic and those who had been providing financial support for his hiding," a source in the prosecutor's office told Reuters news agency.
There were no reports of arrests and a Reuters cameraman said several white police vehicles left the factory after 3.30pm.
The arrest of Mr Mladic is key for Serbia to join the European Union, a priority for the country's four-month-old government. Serbia said last week the search had been intensified.
"I haven't seen Mladic for a long time," factory owner Vidoje Vujic said, adding that he met Mladic's son last year.
He said police took his mobile phones and seized several pictures, including one of former Bosnian Serb parliament speaker Momcilo Krajisnik who is on trial in The Hague.
Earlier, B92 radio quoted police sources as saying "a thorough police action to arrest Ratko Mladic and his helpers" was under way.
Serbian media have reported previously that Mladic was hiding near Valjevo and the police had searched the nearby mountain of Divcibare several years ago.
Serbia had hoped that the July arrest of Radovan Karadzic would boost its EU aspirations, but the 27-nation bloc said Mladic also must be arrested.
The chief war crimes prosecutor at The Hague, Serge Brammertz, is expected to visit Serbia next week to report on the Balkan country's progress in the hunt for Mladic and a second war crimes fugitive, Goran Hadzic.
Mladic, last seen in 1999, hid in Serbian army facilities until 2002, and later moved around several apartments in the New Belgrade district of the capital Belgrade.
Reuters