The Syrian army has denied killing any civilians died in an attack on a village in Hama province, which opposition activists claim left more than 200 people dead.
It said the air and ground assault on Tremseh village only killed terrorists.
"Army units carried out a special operation targeting armed terrorist groups and their leadership hideouts," a spokesman said. "The terrorists were dealt with, while there were no civilian victims."
But opposition sources said the majority of the dead - who were reportedly cut down by helicopter gunships and militiamen - were civilians.
The group of UN observers, deployed to Syria to monitor a now failed ceasefire, could only get within about four miles of Tremseh before being stopped by army commanders because of "military operations".
However, they witnessed more than 100 explosions, sporadic small arms fire and heavy machinegun fire over an eight-hour period. They also saw an Mi-24 helicopters was firing air-to-ground rockets.
"SAAF forces continue to target populated urban areas north of Hama City in a large scale," the observers' report said, referring to the Syrian Arab Air Force.
"The operation in Tremseh is assessed as an extension of the SAAF operation in Khan Sheikhoun to Souran over the recent number of days."
UN special envoy Kofi Annan said in a letter to the Security Council: "Tragically, we now have another grim reminder that the council's resolutions continue to be flouted."
Some victims died in the shelling while others were executed later, according to activists.
Hama resident Rami Abo Adnan told Sky News: "Most of them were slaughtered by knife, including women and children. Burning bodies were found."
A Hama-based activist who identified himself as Abu Ghazi said that regime troops started shelling the village at around 6am.
"The number of martyrs is very high partly because the army shelled a mosque where scores of people had taken shelter, to treat the wounded and hide from the bombs," he said.
"But it is obvious that the regime knows no limits. The mosque was shelled, it collapsed, and that killed the people in it."
He said the village, which had a population of 7,000, is "empty now".
Fadi Sameh, an opposition activist from Tremseh, said he had left the town before the reported killing spree but was in touch with residents.
He said: "Whole houses have been destroyed and burned from the shelling. Every family in the town seems to have members killed. We have names of men, women and children from countless families."
It is almost impossible to confirm the claims as journalists face serious restriction in Syria, but the highest estimates of the death toll would make it the worst single incident of violence in 16 months of conflict between rebels and President Bashar al Assad's forces.
Details of the alleged massacre emerged as Russia refused to support the threat of further sanctions against Syria .
US Secretary of State Hillary Clinton said the UN Security Council must make it clear to Mr Assad that there would be consequences after it "deliberately murdered innocent civilians".
"We call for an immediate ceasefire in and around Hama to allow the UN observer mission to enter Tremseh," she said.
"Those who committed these atrocities will be identified and held accountable."
The Council must decide the future of the mission before July 20, when its initial 90-day mandate expires.
Russia has proposed extending the mission for 90 days, but Britain, the United States, France and Germany countered with a draft resolution to extend the mission for just 45 days and place Annan's peace plan under Chapter 7 of the UN Charter.
Chapter 7 allows the council to authorize actions ranging from diplomatic and economic sanctions to military intervention.
But Russian Deputy UN ambassador Alexander Pankin said that Moscow was "definitely against" Chapter 7.
Meanwhile, the Syrian Observatory for Human Rights reported that troops shot at protesters in Damascus and Aleppo on Friday, killing at least 63 people, including 17 civilians.