Serbia Prime Minister Ivica Dacic has told the country it has "practically" lost sovereignty over Kosovo.
Mr Dacic said autonomy for ethnic Serbs living in Kosovo was the most Serbia could hope to salvage.
They were some of the boldest remarks by a Serbian leader on Kosovo since NATO bombs wrested the former province from Serbia’s control in 1999.
Mr Dacic said Serbia could not afford to "keep its head in the sand".
He said: "Serbian sovereignty over Kosovo is practically non-existent."
Serbia's parliament debated a resolution calling for autonomy for tens of thousands of ethnic Serbs still living in mainly Albanian Kosovo.
Mr Dacic's government, like all others since the 1998-99 Kosovo war, has ruled out ever recognising Kosovo.
He has been signalling a more pragmatic approach as Serbia seeks to start talks on joining the European Union.
Backed by the West, Kosovo declared independence from Serbia in 2008.
The independence came nine years after a brutal Serbian counter-insurgency war forced NATO intervention to halt a Balkan bloodbath presided over by late Serb leader Slobodan Milosevic.
More than 90 countries have recognised the young country.
But it continues to be challenged by a de facto ethnic partition between the 90% Albanian majority and a small Serb enclave in the north, which is propped up by Serbia.
The EU made Serbia an official candidate for accession last year.
It is pressing Mr Dacic's government to loosen its control over north Kosovo and to establish functional, neighbourly relations with its former province, even without recognising it as independent.
EU foreign policy chief Catherine Ashton is chairing talks between Mr Dacic and his Kosovo counterpart, former guerrilla commander Hashim Thaci.
The talks will resume on 17 January in Brussels.