Ukrainian troops and pro-Russian separatists were locked in fierce fighting in eastern Ukraine on Thursday after rebels rejected a call to lay down their arms in line with a peace plan proposed by President Petro Poroshenko, government forces said.
Heavy fighting broke out at around 4 a.m. (0100 GMT) near the town of Krasny Liman, which itself has been under government control since early this month.
"We issued an ultimatum to the terrorists overnight to surrender their weapons. We guarantee their safety and investigation in line with Ukrainian law ... They refused," said government forces spokesman Vladyslav Seleznyov.
"Now we are trying to narrow the encirclement. They are trying to break out," Seleznyov said.
No details of the fighting were immediately available from the rebels' side.
Poroshenko, inaugurated on June 7, is pushing a peace plan to end the separatist rebellion including an offer of a unilateral ceasefire by government forces and amnesty for the separatists as long as they put down their weapons.
Poroshenko was due later on Thursday to meet regional officials from the Donetsk and Luhansk regions —home to much of the violence— to explain his plan, though he rules out meeting separatists.
Up to 4,000 separatist fighters could be involved in Thursday's fighting near Krasny Liman, and armored vehicles and possibly tanks were being used by both sides, the military source said.
The reported use of tanks could not be independently confirmed.
Military sources said the Ukrainian forces had fired leaflets into rebel areas giving them an ultimatum to lay down their weapons in line with the Poroshenko blueprint.
"When they received a refusal, the forces of the anti-terrorist operation proceeded to take action," Dmytro Tymchuk, a military analyst with good sources in the military said.
"There's a major battle going on which exceeds in terms of force and scale anything there has been up to now," a military source said.
Olesya, a woman in the village of Yampil near Krasny Liman, said Ukrainian forces had entered the village in armored vehicles bearing the Ukrainian flag.
"There's been no shooting. We residents went out into the street to watch the column — and then went back to hide in our houses again," she said by telephone from her house where she was with her husband and five-year-old daughter.
"But there was fighting all night. Mines were flying over our heads. Planes flew over and we could hear heavy weapons. It's awful what is going on here," she said.
Asked about the report that 4,000 separatists could be involved, Seleznyov, the government forces spokesman, replied: "Then, there'll be 4,000 coffins."