Berkshire Hathaway is Kraft's biggest shareholder, with a share holding of 9.4%.
Kraft plans to issue 370 million shares at around the current price of $US27 a share, to help fund its $16.4 billion acquisition of Cadbury. The deal involves a mixture of cash and Kraft script.
This morning, Kraft announced it would increase the cash portion of its offer to Cadbury shareholders, sparking Buffett into action.
"The share-issuance proposal, if enacted, will give Kraft a blank cheque allowing it to change its offer to Cadbury – in any way it wishes – from the transaction presented to shareholders in the proxy statement. And we worry very much that, indeed, there will be an additional change from the revision announced this morning," Berkshire said in a statement.
"To state the matter simply, a shareholder voting "yes" today is authorising a huge transaction without knowing its cost or the means of payment.
However, Buffett has not completely shut the door on the deal, saying he could back a proposal that does not "destroy shareholder value".
Analysts are shocked at Buffett's aggressive stance.
"If Buffett votes against something - that carries a great deal of weight with other shareholders. When he says no, no is what he says and means," Jerry Bruni, chief executive and portfolio manager of J.V. Bruni and Co told Reuters.
The Buffett announcement is a rebuke for Kraft chief executive Irene Rosenfeld, who said that the board would take Buffett's opinion seriously.
