About 50 troops took up positions on Tuesday morning around the home of Sonja Karadzic in the Bosnian Serb wartime stronghold of Pale.
They also surrounded the private medical practice of his wife Ljiljana Karadzic as well as a police station.
Dale MacEachern, spokesman for the NATO-led Stabilization Force (SFOR), described the operation as "standard", but declined to say if it was targeting war crimes fugitives.
Its goal, he said, was to "disrupt" the activities of people acting in violation of the 1995 peace agreement that ended Bosnia's 1992-95 war.
These kind of operations will be "repeated from time to time", he added.
But Pale residents poured scorn on the Pale operation.
"They will never arrest Karadzic in such a way," said Niko Dzukanovic, a resident living near Ljiljana Karadzic's medical office.
"I am not afraid but I still do not feel comfortable. All those guns and soldiers around me, I simply do not approve of such things," he added.
Milosevic (R) was Karadzic's
Karadzic, 58, is seen as a hero by many in the Republika Srpska, the post-war Bosnian Serb entity.
The former Bosnian Serb leader has evaded arrest since his indictment for war crimes eight years ago.
He has played cat-and-mouse with NATO-led troops since they poured into Bosnia in 1996 to oversee the Dayton peace accord.
The peacekeepers made two failed attempts last year to arrest Karadzic in the Serb-controlled southeastern pocket of Bosnia where he is believed to be hiding.
He is charged with genocide and crimes against humanity during the 1992-95 war, notably for the siege of Sarajevo and the massacre of more than 7000 Bosnian Muslims in Srebrenica.
The operation in Pale comes less than two weeks after the peacekeepers' first known attempt to arrest Karadzic's military commander, Ratko Mladic.
The two men top the list of war crimes suspects wanted by the International Criminal Tribunal for ex-Yugoslavia in The Hague.
They are seen as key players in the Bosnian war that sought to create a Serbian state with a brutal campaign of killings, internments, rape and forced deportation of non-Serbs.
The two men are also seen as critical to prosecution attempts to put blame for the war on their former patron Slobodan Milosevic.
The Bosnian war is estimated to have killed more than 200,000 people and created two million refugees.