The Ukrainian government Friday launched a full-scale operation in the eastern town of Sloviansk, using aircraft and landing troops against pro-Russian activists even as Russia slammed the move.
Ukraine's Interior Minister Arsen Avakov said gunmen shot down at least two army helicopters in Sloviansk, killing one pilot and capturing the other.
"The terrorists opened fire with heavy weapons against Ukrainian special units. A real battle with professional mercenaries is going on," BBC quoted Avakov as saying.
Nine rebel checkpoints have also been seized, Avokhov added.
Ukraine's acting President Alexander Turchynov launched the operation as pro-Russian activists Thursday seized the regional prosecutor's office in the eastern city of Donetsk.
They forced their way into the building, stripped weapons and shields from police officers and raised the flag of the self-proclaimed Donetsk People's Republic.
The city of Sloviansk has been completely sealed off.
Russia slammed Ukraine for its military assault, saying it would wipe out all hope for the viability of the Geneva agreements.
"During a visit to Minsk, President Vladimir Putin called such a possible operation criminal. Regrettably, the ongoing events have fully confirmed this assessment," Xinhua quoted Kremlin spokesman Dmitry Peskov as saying.
Noting that Ukraine had "crossed out" the Geneva agreements reached April 17, Peskov said it is "hardly possible to say today that some may expect at least parts of these agreements to be implemented".
Peskov also said that Moscow was "extremely concerned" over the safety of Russia's presidential special envoy Vladimir Lukin and journalists who were visiting the conflict zone.
Russia's foreign ministry repeated in a statement that "using the army against its own people is a crime and will lead Ukraine to a catastrophe".
Meanwhile, German Chancellor Angela Merkel Thursday called upon Russian President Vladimir Putin to exert his influence to help achieve the release of detained military observers in Ukraine.
Eight members of an inspection team from the Organisation for Security and Cooperation in Europe (OSCE) were captured by pro-Russian protestors in eastern Ukraine.
The group includes seven military officers, three from Germany and one each from the Czech Republic, Denmark, Poland and Sweden, and a German interpreter, along with five Ukrainian military escorts.
The Swedish inspector was released Sunday as he reportedly suffered from diabetes. Other team members are still being held captive.
Ukraine blames Russia for organising the seizure of a number of offices in towns in the east. Russia denies all accusations made by Ukraine.
In another development, Russia Friday said its passenger planes were banned by Kiev from entering two eastern Ukrainian cities, but pledged not to strike back.
"The Federal Agency for Air Transportation has been informed that starting from May 2, Ukrainian authorities have unilaterally banned Russian airlines from fulfilling flights to the airports of Donetsk and Kharkov," the agency said in a statement.
Calling the ban an "unprecedented" breach of international air service agreements, Moscow said the decision seriously violated passengers' rights and may cause a transport blockade in Ukraine's eastern regions, Xinhua reported.
Meanwhile, the agency said Moscow would not take any symmetrical measures, urging Kiev to refrain from any unfriendly steps.