"It will be in place until the occupiers return stolen Ukrainian industry to Ukrainian jurisdiction," Ukrainian President Petro Poroshenko told the country's national security council in Kiev, Russia's Interfax news agency reported.
Despite a three-year conflict, many trade links have been preserved between the separatist-controlled areas dominated by heavy industry, particularly coal mining and metallurgy, and government-held Ukraine.
All rail and road connections with the rebel-controlled mini-states will be cut from today, Oleksander Turchynov, the head of the national security council, told reporters after the meeting, the Tass news agency reported.
The announcement follows recent unofficial economic blockades organised by nationalist activists around the rebel-held areas.
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The activist blockades that began in January seriously hit trade on both sides, cutting off coal shipments to government-controlled territory and impeding deliveries from the mills and factories that are the east's economic backbone.
The activists were criticized by Poroshenko's government, which said the blockade hurt ordinary Ukrainians by reducing coal supplies and creating power shortages. Earlier this week dozens of activists taking part in the blockade were detained by Ukrainian security services.
Rebel leaders in Donetsk said earlier this month that they had taken over the management of 40 factories and coal mines in retaliation for the blockade. They include those owned by Rinat Akhmetov, who is regarded as Ukraine's richest person.