The decision was adopted at the proposal of Serbian President Boris Tadic.
Belgrade Mayor Nenad Bogdanovic said that he would not allow the former Serbian and Yugoslav President to be buried in Great Men's Alley of Belgrade's New Cemetery.
The Socialist Party (SPS), whose leader Milosevic was, and the Radical Party insist that he buried in the said Alley.
Bogdanovic has issued a press release explaining that traces which the Milosevic regime has left behind are the main reason why he cannot be buried in the section of the cemetery reserved for distinguished citizens and why he cannot have any distinguished place in Serbian history.
The lawyer for the Milosevic family, Zdenko Tomanovic, on Monday submitted a request for the withdrawal of an international warrant for the arrest of Mirjana Markovic, Milosevic's widow, and for the withdrawal of her indictment "due to new circumstances", so that she can attend her husband's funeral in Belgrade, Radio B92 said quoting a court spokeswoman.
The Beta news agency quoted Mira Ilic, the deputy prosecutor of the Belgrade Office of Prosecutor, as saying that there were no legal grounds for dropping the charges due to the death of a family member.
She explained that only the head of state can discontinue the prosecution by amnestying the indictee in question.
Serbian President Boris Tadic will not grant an amnesty to Mirjana Markovic, the President's Office said in a statement on Sunday evening. According to the statement, Tadic believes that a state funeral for Milosevic would be "absolutely inappropriate" considering the role he played in Serbia's recent history.
Serbian courts have issued an international warrant for the arrest of Milosevic's wife and their son, Marko Milosevic.
Mirjana Markovic is accused of abusing her position to grant a government apartment to her grandson's nanny, while Marko Milosevic is charged with several violent crimes. They are believed to be hiding in Russia.
The Serbian Interior Ministry also wants to interview Markovic in connection with the 2000 abduction and assassination of former Serbian President Ivan Stambolic.