Ukraine's Interior Minister Arsen Avakov said Friday that gunmen shot down at least two army helicopters in the eastern town of 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 Friday launched a full-scale operation in Sloviansk, using aircraft and landing troops against the pro-Russian activists.
The operation came 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.
More From This Section
The city of Sloviansk has been completely sealed off.
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.