Ukraine President Petro Poroshenko brandished passports and military ID cards he said were captured from Russian soldiers deep inside the country, while the border was "swarming with tanks" and other arms.
"Today a former strategic partner is waging a hidden war against a sovereign state," he told world leaders at the Munich Security Conference (MSC).
Fresh fighting in the former Soviet republic claimed 12 more lives as Kiev warned the Russian-backed separatists were planning a new offensive.
"It is uncertain whether it will lead to success, but from my point of view and that of the French president it is definitely worth trying," she said.
Also Read
US Vice President Joe Biden voiced both support and scepticism, saying: "Given Russia's recent history, we need to judge its deeds not its words. Don't tell us, show us, President Putin!"
"Too many times President Putin has promised peace and delivered tanks and troops and weapons".
"If we fail to find a lasting peace agreement, we know the scenario perfectly well -- it has a name, it is called war."
While Western leaders were united in condemning Russia for supporting rebels, they differed on whether to back Ukraine's beleaguered army with weapons.
Momentum has built in Washington for giving Kiev high-tech military equipment but Merkel insisted such a step would only make matters worse.
"I can't conceive of a situation where better armaments for the Ukrainian army would so impress President Putin that he believes he will militarily lose," she said.
Putin, meanwhile, said Russia was not at war and does not want war with anyone but lashed out at Western sanctions imposed as the Ukraine crisis has deepened.
In the German city of Munich, his Foreign Minister Sergei Lavrov said he believed the new peace plan could help end the conflict, all the while charging the US and EU with having escalated the conflict at every turn.
"These talks will continue as you know; we believe there is every possibility that we will reach a result and agree the recommendations that will allow the sides to really untie this knot of a conflict," Lavrov said.