Ukraine said Tuesday fighting had erupted in the heart of major rebel stronghold Lugansk, as the bodies of 17 civilians fleeing the city were recovered from wreckage of their destroyed convoy.
Kiev's military claimed street battles with insurgents were raging in the city centre after one outlying district was "liberated".
If confirmed, any advance by Ukraine's army into Lugansk, which has endured brutal shelling and weeks without running water or electricity, would be a major breakthrough for Kiev after four months of fighting that has claimed over 2,100 lives.
Adding to this toll, the military said it had recovered the bodies of 17 civilians burned alive when a convoy evacuating them from Lugansk was hit by a rebel mortar strike on Monday.
Pro-Kremlin insurgents have denied the allegations, which could not be independently verified.
But the claim of a strike on civilians drew calls for restraint, with UN chief Ban Ki-moon saying the "tragic incident makes the urgency of a ceasefire and a diplomatic solution even more stark".
A fresh push to ease tensions between Moscow and Kiev was underway, after weekend talks between the top diplomats from both countries failed to make any breakthrough.
The Kremlin announced that Russian President Vladimir Putin and his Ukrainian counterpart Petro Poroshenko will hold their first face-to-face talks in almost three months at a meeting in Minsk with top EU officials on August 26.
The encounter will come three days after a key visit by German Chancellor Angela Merkel to Kiev for crisis talks with Ukraine's leadership.
Two senior UN officials -- Under-Secretary General Jeffrey Feltman and humanitarian aid chief Valerie Amos -- are also set to travel to Kiev later this week.
Ukraine has blasted Moscow for "failing to recognise the facts" over the continuing flow of arms from Russia to the rebels but Moscow has repeatedly denied those claims and lambasted Kiev for not halting its offensive in the east.
- No peace, no water -
In the industrial eastern region, where fighting has raged since insurgents took up arms against Kiev's rule in April, deadly shelling also rained down around the main rebel stronghold of Donetsk as government troops tightened their grip on rebels clinging on.
An AFP photographer in the adjoining city of Makiyivka saw the bodies of one woman and two men killed by shelling sprawled in the streets.
Smoke could also be seen billowing from the nearby town of Yasynuvata, where Kiev said its troops were conducting a "mopping-up" operation.
Residents in Donetsk, which had a pre-war population of one million, were also queueing again for water after fighting cut supplies over the weekend.
Poroshenko said Monday that Ukraine was readjusting its military strategy following fresh rebel claims they were receiving troop reinforcements from neighbouring Russia to prop up their struggling insurgency, which has forced more than 285,000 people to flee.
He said government forces were "regrouping" as they sought to continue the offensive.
A military spokesman said one soldier was killed and 28 injured over the past 24 hours.
- Aid delayed -
A controversial Russian aid convoy was meanwhile still stuck waiting to be checked near Ukraine's restive border as haggling over whether it could cross dragged on.
Red Cross representative Laurent Corbaz headed to Moscow Tuesday to discuss with Russian officials the delivery of humanitarian aid to east Ukraine.
The Red Cross -- which is meant to oversee the delivery of the cargo -- says it has not yet received security guarantees on how it will cross rebel territory.
"We have no date, no hour" for when the convoy may go to the Ukrainian side, Paul Picard, a monitor for the Organisation for Security and Cooperation in Europe (OSCE) at the border, told journalists.
Kiev and the West fear the shipment is a ploy to bolster the rebellion or provide a pretext for Russia to invade, allegations dismissed by Moscow.