"An increasing number of Russian troops are intervening directly in fighting on Ukrainian territory," the US ambassador to Kiev Geoffrey Pyatt wrote on Twitter.
"Russia has also sent its newest air defence systems including the SA-22 into eastern Ukraine and is now directly involved in the fighting," he said.
After weeks of government offensives that have seen troops push deep into the last rebel bastions in the industrial east of Ukraine, the tide has turned dramatically in the four-month conflict.
Ukraine's Prime Minister Arseniy Yatsenyuk blasted Russian President Vladimir Putin for having "deliberately unleashed a war in Europe" and called for an emergency UN Security Council meeting, a called echoed by Lithuania.
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A top rebel leader, Alexander Zakharchenko, yesterday admitted Russian troops were fighting alongside his insurgents, but said they were on "holiday" after volunteering to join the battle.
There has been increasing concern in Kiev and the West of Russia's direct involvement in the conflict -- a charge Moscow has repeatedly denied.
French President Francois Hollande warned it would be "intolerable and unacceptable" if Russian troops were on the ground after German Chancellor Angela Merkel demanded an explanation from Putin over the reports.
European security body OSCE called a special meeting to discuss "Russia violations in Ukraine".
A volunteer pro-Kiev commander yesterday said government troops were surrounded in the key transport hub of Ilovaysk southeast of Donetsk towards the Russian border.
Russian has repeatedly denied it is involved in the insurrection in the former Soviet state, and Foreign Minister Sergei Lavrov said yesterday the Kremlin was "not interested in breaking up" Ukraine.