Putin, speaking today at the St Petersburg International Economic Forum, said such decentralisation is a key part of the February peace agreement signed in Minsk.
Ukraine and the West have accused Russia of breaking the Minsk deal by continuing to support the separatists with troops and weapons. Moscow denies this.
Commenting on the accusations, Putin said the rebels were simply defending themselves against the Ukrainian military. He added "once an attempt is made to solve the problem by political means, those weapons will be gone."