Ukraine said its artillery destroyed part of a Russian armored column that entered its territory overnight and said its forces came under shellfire from Russia on Friday in what appeared to be a major military escalation between the ex-Soviet states.
Russia's government denied its forces had crossed into Ukraine, calling the Ukrainian report "some kind of fantasy", and in turn raised its own serious concerns about activity by the U.S.-led NATO defense alliance near its borders.
Moscow accused Kiev of trying to sabotage aid deliveries to eastern areas torn by fighting between pro-Russian separatists and the Western-backed government of Moscow's former satellite.
In a call to U.S. Defense Secretary Chuck Hagel, as reported by Russia's state news agency RIA, Defense Minister Sergei Shoigu said Moscow was "seriously concerned" by increased NATO activity and called for a ceasefire to get aid into Ukraine. The agency did not specify what Western military movements he meant.
NATO said there had been a Russian incursion into Ukraine, which is not a member of its mutual defense pact, but it avoiding calling it an invasion. Other European capitals accused the Kremlin of escalating a conflict that has revived Cold War-era animosities and chilled the region's struggling economies.
The United Nations said it could not verify the reports from the Ukrainian border but called for an immediate de-escalation.
Kiev and its Western allies have repeatedly accused Russia of arming pro-Moscow separatist rebels in eastern Ukraine, and of sending undercover military units onto Ukrainian soil. They have also expressed concern Russia may use an aid convoy it has assembled on the border as a pretext for stoking the conflict.
It was not clear whether the armored column was officially part of the Russian army on active service. But evidence of Russian military vehicles captured or destroyed on Ukrainian territory would give extra force to Kiev's allegations - and possibly spark a new round of sanctions against the Kremlin.
Andriy Lysenko, a spokesman for the Ukrainian military, told a news briefing that Kiev's forces had picked up a Russian military column crossing the border under cover of darkness.
"Appropriate actions were undertaken and a part of it no longer exists," Lysenko said.
The situation in the conflict zone was becoming increasingly tense, he said, with Ukrainian forces which are fighting pro-Russian separatists also coming under artillery attack from Russian territory.
Ukrainian President Petro Poroshenko briefed British Prime Minister David Cameron on the incident and told him a "significant" part of the Russian column had been destroyed, according to statement from Poroshenko's office.
But Russia's Defense Ministry said no such military force had crossed the border into eastern Ukraine. State news agency RIA quoted a ministry statement saying: "There was no Russian military column that crossed the Russian-Ukrainian border either at night or during the day."
It called the Ukrainian report "some kind of fantasy".
Britain summoned Russia's ambassador to ask him to clarify reports of a military incursion into Ukraine, and European Union foreign ministers said any unilateral military actions by Russia in Ukraine would be a blatant violation of international law.
"WE HAVE TO TALK"
In a sign of efforts to unwind the crisis, the Kremlin said the Ukrainian and Russian chiefs of presidential staff met in Russia on Friday and the Ukrainian foreign minister said he would meet his Russian counterpart in Berlin on Sunday.
Earlier on Friday, responding to reports that a Russian column had entered Ukraine overnight, NATO Secretary-General Anders Fogh Rasmussen said the alliance had seen what he called a Russian incursion into Ukraine.
"It just confirms the fact that we see a continuous flow of weapons and fighters from Russia into eastern Ukraine and it is a clear demonstration of continued Russian involvement in the destabilization of eastern Ukraine," the NATO chief said.
A spokesman for Russia's border guard service was also quoted by Russian news agencies as denying that any Russian military units had entered Ukraine.
In a statement issued by the Russian foreign ministry, Moscow accused Ukrainian forces of intensifying the fighting against pro-Moscow separatists in eastern Ukraine in an attempt to sabotage Russian efforts to get aid into rebel-held areas.
A caravan of 280 trucks taking Russian aid to eastern Ukraine was parked on the Russian side of the border on Friday.
The International Committee of the Red Cross said it would deliver the aid after Kiev expressed fear the convoy could be used to help the rebels and urged both sides on Friday to agree quickly on how it should be done.
After Ukraine reported the clash, Russia's ruble currency weakened against both the dollar and the euro. Russian shares were also dragged lower.
Global equity markets retreated and yields on benchmark German government bonds - a traditional safe haven for investors - plumbed record lows below 1 percent.
Ukrainian Foreign Minister Pavlo Klimkin said in a Twitter post he would meet Russia's Sergei Lavrov and the German and French foreign ministers on Sunday in Berlin: "It can be at a square table or a round table," he said. "But we have to talk."
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