The offensive against the separatist militants threatens to further escalate tensions with Russia, which has 40,000 troops massed on Ukraine's eastern border and has warned Kiev against the use of force.
Also check: Malaysia Airlines MH370: Latest photos
Ukraine's Interior Minister Arsen Avakov announced on Facebook that units from "all of the country's force structures" were taking part in the operation in the poor mining town of Slavyansk. He later said the gunmen had opened fire on special forces and were "shooting to kill".
With military precision and dressed in unmarked fatigues, heavily armed militants yesterday launched a series of attacks against security buildings in the tinderbox eastern rust belt.
This came after a week of soaring tensions as pro-Russians demanding greater autonomy, or to join nearby Russia, stepped up protests in the region.
Avakov said the events were seen in Kiev as an "act of aggression" by Russia, which has flatly denied any role in the unrest sweeping Ukraine's east.
US Secretary of State John Kerry yesterday phoned his Russian counterpart Sergei Lavrov and "made clear that if Russia did not take steps to de-escalate in eastern Ukraine and move its troops back from Ukraine's border, there would be additional consequences", a senior State Department official said.
A first wave of US sanctions unveiled in March blacklisted officials and businesspeople close to Russian President Vladimir Putin to protest at Moscow's takeover of Crimea.
And today, France said it would support new sanctions against Moscow if there is a military escalation in Ukraine, speaking on the eve of a meeting of EU foreign ministers in Luxembourg to discuss the crisis.
UN Secretary General Ban Ki-moon late yesterday called on all sides to "exercise maximum restraint" and engage in dialogue to calm a situation that has a "growing potential for violent clashes", a UN statement said.
The volatile situation in the east cast doubt on planned direct talks between EU and US diplomats and their Moscow and Kiev counterparts in Geneva on Thursday.
Lavrov had warned that if Kiev used force against "residents of the south-east driven to despair", the talks would be in jeopardy.
Acting Ukrainian president Oleksandr Turchynov convened an emergency security meeting as the violence spread yesterdaynight, with no announcement except that the participants were considering measures to allow "normalisation of the situation in eastern Ukraine".
Ukraine's interim government has been facing relentless pressure from Russia since its February ouster of an unpopular Kremlin-backed president and decision to seek closer ties with the West.
Pro-Russian protesters last week seized control of the Donetsk government seat - where they have declared independence as the "Donetsk Peoples Republic" - and a state security building in the nearby eastern city of Lugansk.
Separatist gunmen were also in control of the police station in Kramatorsk after a gunfight yesterday.