Seven Ukrainian soldiers have been killed in an ambush in the eastern Donetsk region, reports say.
A unit was attacked near the town of Kramatorsk by about 30 heavily-armed rebels, the defence ministry said. One rebel is also said to have died.
Correspondents say this is the most serious loss of life for the government in its operation against separatists.
Donetsk is one of two regions declared separate from Ukraine after referendums deemed illegal by Kiev, the US and EU.
The defence ministry said an armoured personnel carrier carrying paratroopers was hit by a rocket-propelled grenade and exploded.
More soldiers were killed or injured in a firefight which ensued with the insurgents, who were said to be hiding in bushes.
On Monday, the pro-Russian separatists who declared independence in Donetsk said that all Ukrainian troops in the region would be viewed as occupying forces and should leave.
Their leader Denis Pushilin called on Russia to "absorb" Donetsk region.
Meanwhile in the neighbouring Luhansk region, separatists said an attempt was made on the life of a rebel leader.
Self-declared governor Valery Bolotov was shot and had lost a lot of blood, but his life was not in danger, the press office of the "Luhansk People's Republic" said.
Earlier the Kiev-appointed governor of Donetsk region said Ukraine was planning a national referendum on devolving power to regions.
Speaking at a news conference in Donetsk, Taruta called on parliament to pass legislation which would authorise a vote to help regions get more power while remaining within Ukraine.
Taruta also described Sunday's separatist referendums in Donetsk and Luhansk as "an opinion poll".
He said the self-declared "People's Republic of Donetsk" did not exist legally or politically, and that the Donetsk region could not survive economically as an independent territory.
People in the east "should hear answers to the questions that they are concerned about", he said.
On a visit to Kiev, Germany's foreign minister urged talks between government and rebels.
Frank-Walter Steinmeier expressed support for a national round table which the government is planning to hold on Wednesday.
Ukrainian officials say the meeting will include politicians and civic leaders from the country's east, but armed separatists have already refused to negotiate.
Steinmeier also backed Ukraine's 25 May presidential vote, which he said would be "crucial" in bringing the country out of its crisis.
Separatists in Donetsk and Luhansk say 89% and 96% respectively voted in favour of "self-rule" in the referendums.
Armed rebels remain in control of many official buildings across eastern Ukraine.
Meanwhile, Russian gas company Gazprom has asked Ukraine to pay $1.66bn (£1bn) for gas deliveries in June.
Gazprom says Ukraine owes it $3.5bn. It recently doubled the price Ukraine must pay for gas - a move that Kiev has refused to accept.
But Ukrainian Prime Minister Arseniy Yatsenyuk said Russia should stop using gas as "a new type of weapon".
He also accused Moscow of seizing Ukrainian property including oil and gas during the annexation of Ukraine's southern autonomous republic of Crimea in March following a controversial referendum.
Yatsenyuk was speaking in Brussels after signing a deal for 1bn euros in EU aid.
The Ukrainian government fears a similar outcome to the annexation of Crimea in Donetsk, Luhansk and parts of the south.
Nato believes some 40,000 Russian troops are deployed near Ukraine's border, although Moscow says they have been pulled back.