The children -- a Serbian boy and girl -- were wounded in an explosion Monday evening when a hand grenade was thrown into their home, the Serbian news agency Tanjug reported.
The children were hospitalized with non-life threatening head and neck injuries from flying shrapnel and were listed in stable condition Tuesday.
The attacks led to immediate speculation it could have been carried out by ethnic Albanian militants. Kosovo police, however, announced Tuesday they had arrested a Serbian man who lived a floor below the victims.
Police said two hand grenades similar to the one that exploded in the family's unit were found in the man's apartment, along with an AK-47 assault rifle and two ammunition clips holding 50 bullets.
The victims' uncle said he rejected the idea the neighbor could have been the perpetrator, saying that although families had their differences, he didn't think they were sufficient to prompt a grenade attack on children.
The incident brought a harsh condemnation from Serbian Prime Minister Ivica Dacic, who said European Union's EULEX rule of law mission and NATO peacekeepers "have a duty to ensure safety for everyone" in Kosovo.
He demanded that the perpetrators of the attack be brought to justice, adding such incidents "hamper dialogue between Belgrade and Pristina.
"For this reason, we once again call on the international forces to do their job and to bring the perpetrators to justice as soon as possible and to ensure conditions for a peaceful co-existence in Kosovo," he said.
The First Deputy Prime Minister Aleksandar Vucic visited the victims at the Children's Clinic in Belgrade Tuesday, vowing Serbia will help find the perpetrators.
Vucic said it is "irrelevant whether this was done by an Albanian or a Serb, what matters is that such a serious crime does not remain unpunished."
Jean-Claude Schlumberger, head of Organization for Security and Cooperation in Europe's mission in Kosovo, similarly condemned the incident.
"A series of troubling security incidents have affected people living in northern Kosovo over the past few days," he said in Vienna. "This latest act resulted in the injury of a 3-year-old boy and 9-year-old girl, which is completely unacceptable."
The Kosovo government denounced the attack as well, urging calm and asking residents cooperate with police and to reject calls for retribution from "groups that are trying to inflame the situation" in Mitrovica.
The Monday grenade attack came after a series of ethnically charged recent incidents throughout Kosovo including two explosions in northern Mitrovica earlier this week, the desecration of cemeteries and vandalism of historical monuments.
"These reprehensible acts harm Kosovo's European aspirations and are counter to universal values," the U.N. Interim Administration Mission in Kosovo said in a statement.
Farid Zarif, special representative of the U.N. secretary-general in Kosovo, said the home bombing was "a cowardly act unbefitting of any civilized society.
"I know that the people of Kosovo are appalled by such reprehensible acts of violence and repudiate them completely. I call on all to clearly condemn these acts. Our hearts go out to the children and all the families affected," he added.