Nato officials have seen Russian military equipment and Russian combat troops entering Ukraine this week, its top commander says.
“Russian tanks, Russian artillery, Russian air defence systems and Russian combat troops” were sighted, US Gen Philip Breedlove said.
Russia’s defence ministry denied that its troops were in eastern Ukraine to help pro-Russian separatists there.
However, the rebels have admitted being helped by “volunteers” from Russia.
The United Nations Security Council is convening an emergency session later on Wednesday to discuss the reported sightings.
Heavy artillery fire rocked the east Ukrainian city of Donetsk, the industrial hub held by pro-Russian separatist rebels, on Wednesday morning.
It was unclear whether the fire came from besieging government forces or the rebels themselves, or both.
There were also reports of fighting near the rebel-held city of Luhansk. One Ukrainian soldier was killed and another injured north of Luhansk, when rebels fired on government positions near the village of Schastya, Ukrainian security forces said.
Analysis: Jonathan Marcus, BBC defence and diplomatic correspondent
Events in Ukraine seem to be turning full circle.
Back in August, Nato was warning about the deployment of Russian artillery batteries inside Ukraine, the supply of Russian military equipment to the rebel forces and the build-up of further Russian combat units at the Ukrainian frontier.
Since then many of these units have been withdrawn.
But now with tensions renewed, Nato’s Supreme Commander in Europe General Philip Breedlove has confirmed that over the past two days, Nato has seen columns of Russian armour, artillery and crucially – combat troops – entering Ukraine.
The question now is whether this is just a re-run of events in the summer or does a more significant clash beckon, perhaps one where the Kremlin may decide – in its terms – to teach the Ukrainians a military lesson.
General Breedlove also confirmed that Nato believes Russia is deploying nuclear-capable weapons to Crimea – a reference to reports that Russia is deploying short-range Iskander ballistic missiles there that could potentially be equipped with nuclear warheads.