The UN Security Council held emergency talks Sunday after Ukraine declared a "full-scale" military operation against pro-Russia forces, amid deadly clashes in its restive east.
Russia and the West locked horns over the escalating crisis in Ukraine with Russian ambassador Vitaly Churkin saying "there has already been bloodshed and a further escalation must be swiftly stopped".
US ambassador Samantha Power accused Russia of waging propaganda and bombarding Ukraine with incitement and violence.
"This is the saddest kind of instability. It is completely man made. It was written and choreographed in and by Russia," Power told the 15-member council.
The latest clashes broke out a day after masked gunmen stormed police and security service buildings in coordinated raids, especially unsettling for Kiev and Western leaders because of their similarity to events leading up to Russia's annexation of Ukraine's Crimean Peninsula.
Ukraine's Interior Minister Arsen Avakov announced the launch of a counterstrike against the armed separatists in the eastern Donetsk region early on Sunday morning.
"There are dead and wounded on both sides. On our side -- an SBU officer. The head of the SBU's anti-terrorist centre has been wounded, as have four others," Avakov wrote on his Facebook page.
"On side of the separatists -- an unidentified number. The separatists have started to protect themselves using human shields."
Ukraine's acting President Oleksandr Turchynov later declared the launch of a "full-scale anti-terrorist operation".
Turchynov told the nation in a televised address that "we will not allow Russia to repeat the Crimean scenario in the east of Ukraine".
"Blood has been spilt in a war that is being waged against Ukraine by Russia," said Turchynov.
"The national security and defence council has decided to launch a full-scale anti-terrorist operation involving the armed forces of Ukraine," he announced
Kiev gave the pro-Russian forces a deadline of 0600 GMT Monday to give up their weapons to escape prosecution.
The Russian foreign ministry immediately responded by accusing Ukraine's leaders of "waging war against their own people".
US ambassador Power urged Russia to explain why 40,000 of its forces are massed on the Ukrainian border and find constructive ideas to stop armed attacks on government buildings in eastern Ukraine.
Moscow has denied playing a role in the latest wave of violence and previously told Kiev that its armed response could ruin the chances of the two sides sitting down for US-EU mediated talks in Geneva on Thursday.
The heavily Russified region has been riven by unrest since pro-Western leaders rose to power in February on the back of bloody protests against the old regime's decision to reject an EU alliance and turn towards Moscow.
Russia has also threatened to halt its neighbour's gas supplies over unpaid bills -- a cutoff that would impact at least 18 EU nations.
European Union foreign ministers will hold talks in Luxembourg Monday dedicated to the growing Ukraine crisis and the threat of a cut in Russian gas deliveries.
Avakov said crack units from Ukraine's SBU security service moved Sunday into the city of Slavyansk to regain control of a police station that had been seized by about 20 militants on Saturday.
But he admitted that his troops had to "regroup" after meeting stiff resistance and suffering casualties.
Russia's state-run RIA Novosti news agency cited one local protester as saying that a civilian had also been killed and two others injured.
The local administration separately reported a series of heavy clashes on a highway linking Slavyansk with the region's capital Donetsk to the south.
The Donetsk administration said one person was killed and four wounded in an "ongoing armed standoff" on a stretch of the road connecting Slavyansk and the town of Artemivsk.
Slavyansk residents meanwhile reported a run on stores and general panic among locals in the poor mining town of 100,000 people.
In response to the violence, ousted Ukrainian president Viktor Yanukovych claimed the country had "found itself in a new situation... and begun to enter into civil war", reported Russian news agencies. He was speaking from Rostov-on-Don in Russia, where he has taken refuge.
Saturday's raids drew expressions of grave concern from world leaders and Russian warnings against any use of force against the militants.
The US State Department said John Kerry phoned his Russian counterpart Sergei Lavrov on Saturday to make "clear that if Russia did not take steps to deescalate in eastern Ukraine and move its troops back from Ukraine's border, there would be additional consequences".
NATO chief Anders Fogh Rasmussen agreed that the "reappearance of men with specialised Russian weapons and identical uniforms without insignia, as previously worn by Russian troops during Russia's illegal and illegitimate seizure of Crimea, is a grave development".
The latest unrest began last weekend when protesters seized the seat of government in Donetsk after similar actions in the eastern cities of Lugansk and Kharkiv.
The Donetsk protesters heavily fortified the building and announced the independence of the "Donetsk People's Republic" -- the flag of which has gone up over newly seized security buildings across the region.
But many of the pro-Russian protests have only drawn crowds of a few hundred and local polls showed the majority of citizens in the Russian-speaking east preferred to remain part of Ukraine.