Moscow denies sending armoured vehicles into Ukraine and the US says it is trying to confirm Kiev's claims about the "invasion".
Ukrainian President Petro Poroshenko says his forces have destroyed part of a Russian armoured convoy that crossed into eastern Ukraine, adding: "We won't tolerate any invasion."
Military officials in Kiev said they tracked the vehicles, including armoured personnel carriers, from the border and then attacked with artillery.
Mr Poroshenko tweeted: "At night much of the armoured vehicles which entered Ukraine (have) been destroyed by the Ukrainian artillery. We won't tolerate any invasion!"
The US said it could not confirm whether Kiev's forces had attacked the convoy, but said Russia had no right to send vehicles into Ukraine.
It condemned Moscow's actions as "extremely dangerous and provocative".
Sky's Foreign Affairs Editor Sam Kiley said the attack would mark "a very serious development" in the four-month conflict, and "could be the beginnings of something much more dangerous".
World stock markets have fallen on the news, with the rouble weakening against the dollar and euro.
Moscow's Defence Ministry denied Ukrainian forces had destroyed a Russian military column, saying no such force had crossed into eastern Ukraine.
It dismissed Kiev's claims as "some kind of fantasy".
Ukraine's Foreign Minister Pavlo Klimkin is due to meet his Russian counterpart Sergei Lavrov in Berlin on Sunday to discuss the crisis.
The European Union said it would consider any Russian incursion as "a blatant violation of international law".
Around 23 Russian military vehicles crossed the border near the town of Donetsk on Thursday night, according to journalists from The Guardian and The Daily Telegraph.
This was later confirmed by Nato chief Anders Fogh Rasmussen, who said it was a "clear demonstration of continued Russian involvement in the destabilisation of eastern Ukraine".
Ukrainian journalist Gregory Zhygalov, in Donetsk, told Sky News Russian military convoys have been crossing into eastern Ukraine "regularly" for the past three months.
He said the difference this time was it was witnessed by international journalists, making it an "incontestable fact".
Earlier, British Foreign Secretary Philip Hammond said he was "very alarmed" at the Russian military incursion and summoned the Russian ambassador to clarify the situation.
Meanwhile, the Red Cross said it is still trying to verify that an aid convoy from Russia to Ukraine is carrying nothing more than humanitarian aid.
Ukrainian border guards are checking the cargo on Russian territory near the Ukrainian settlement of Izvaryne, held by separatists.
A dozen Russian armoured trucks are waiting with the aid lorries.
Ukraine is concerned the convoy of about 260 vehicles would be used as a 'Trojan horse', allowing Russia to establish a permanent presence in the east.
In an effort to ease tensions, Russian officials allowed journalists to see the contents of trucks.
Among the supplies reporters saw were bottles of water, sacks of buckwheat and portable generators.
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