Separatists backed by Russian soldiers have entered the town of Novoazovsk in southeastern Ukraine, a pro-government militia fighter said on Thursday.
A military source said the separatist forces had also taken Savur-Mohyla, a hill east of Donetsk which gives strategic command over large areas of the territory.
The sudden reverses for the Ukrainian military appeared to confirm the arrival of Russian forces to support the separatists, who have in recent weeks been under pressure from government forces in their strongholds of Donetsk and Luhansk, the east's two main cities.
"There is military equipment in Novoazovsk which came across the border two days ago from Russia," the fighter, from the so-called Azov battalion which supports the Ukrainian army, told Reuters by telephone. "The equipment is carrying the flags of the DNR (Donetsk People's Republic) rebels but they are regular Russian forces," the fighter who did not wish to be identified by name, said.
Separately, a resident of the town on the Sea of Azov, who would only give his first name of Mykola, said: "The authorities in the town are DNR ones. Tanks are moving here and there out on the highway, but there is no fighting going on for the town."
Novoazovsk has been under pressure for the past two days from an armoured column which the Ukrainians say came in across the border from Russia and headed south towards the Sea of Azov.
The loss of Novoazovsk, which was confirmed unofficially by a Kiev military source who did not want to be named, is a blow to government forces since it leaves vulnerable the big port city of Mariupol, further west along the coast.
The U.S. ambassador to Kiev, Geoffrey Pyatt, said in Tweet: "Russian supplied tanks, armored vehicles, artillery and multiple rocket launchers have been insufficient to defeat Ukraine' armed forces. So now an increasing number of Russian troops are intervening directly in fighting on Ukrainian territor.
"Russia has also sent its newest air defense systems including the SA-22 into eastern Ukraine & is now directly involved in the fighting," he said.