Ukraine says Russian forces are fighting alongside rebels in the east of the country
EU leaders are to meet in Brussels to consider fresh sanctions against Russia following accusations that its troops are fighting inside Ukraine.
Russia denies that its regular forces are backing a rebel offensive in eastern Ukraine.
But ahead of the summit, EU officials said a clear message must be sent to Russia to de-escalate the crisis.
In Ukraine, a number of government troops remain encircled by the rebels in the Donetsk region.
Reports say the pro-Russian fighters have issued an ultimatum to the Ukrainian troops near the town of Ilovaisk to surrender by Saturday morning.
Some 2,600 people have died in fighting in the Donetsk and Luhansk regions.
The conflict there erupted in April following Russia's annexation of Ukraine's southern Crimea peninsula a month before.
In Brussels, the leaders of the 28-member bloc are also to decide who will fill two of Europe's top jobs: president of the European Council and foreign policy chief to replace Herman Van Rompuy and Catherine Ashton.
A few hours before the summit, Ukrainian President Petro Poroshenko is due to meet Van Rompuy and Jose Manuel Barroso, the outgoing head of the Commission.
Poroshenko is expected to press for tougher action against the Kremlin and will later make a speech at the summit.
On Friday, German Foreign Minister Frank-Walter Steinmeier warned that the "already dangerous situation" in Ukraine had now entered "a whole new dimension".
"The border infringements have intensified, and raised concerns that the situation is slipping out of control.
"This needs to stop, especially if we want to avoid direct military confrontation between Ukrainian and Russian military forces."
He was referring to claims by Ukraine that regular Russian troops had entered Ukraine, capturing the south-eastern town of Novoazovsk.
Russia denies the accusation.
But it remains unclear if a new round of sanctions will be adopted in Brussels.
The EU and the US have already imposed sanctions against dozens of senior Russian officials, separatist commanders and Russian firms accused of undermining Ukrainian sovereignty.
In late July, the EU also blacklisted some key economic sectors, prompting Russia to retaliate by banning food imports.
Russia's energy minister has warned that the Ukrainian crisis could lead to a disruption of gas supplies to European countries this winter.
On Friday, Nato held an emergency meeting after releasing satellite images it said showed columns of Russian armed forces inside Ukrainian territory.
Handout of a satellite image provided to Reuters by Supreme Headquarters Allied Powers Europe (SHAPE), showing what is reported by SHAPE a presence of Russian Self-Propelled Artillery in Ukraine
This satellite image provided by the Supreme Headquarters Allied Powers Europe shows what Nato identifies as Russian self-propelled artillery in Ukraine
Secretary-General Anders Fogh Rasmussen called on Russia to "take immediate and verifiable steps towards de-escalation".
Rasmussen also indicated Nato could consider Ukraine's application to join the alliance, shortly after Prime Minister Arseniy Yatsenyuk announced he was putting Ukraine on course for Nato membership.