Russia has built up the number of combat ready troops on the Ukrainian border to 20,000, according to Nato.
Officials fear the troop movements are a precursor to an invasion, which could be carried out under the pretext of a humanitarian or peacekeeping mission.
It comes as Russia bans beef, pork, fruit and vegetable produce, poultry, fish, cheese, milk and dairy imports from the EU, US, Australia, Norway and Canada. The move is a response to sanctions against Russia.
Fighting has continued in eastern Ukraine, where some 1,300 people have been killed since April, according to the United Nations.
The rebel leadership in the city of Horlivka, about 22 miles (35km) north of Donetsk, said 33 civilians had been killed and 129 wounded by shelling over the past few days.
The Ukrainian military said 18 of its soldiers had been killed and 54 injured in fighting over the past 24 hours, the highest number killed or injured in weeks.
Refugees fleeing fighting in south eastern Ukraine take shelter in DonetskIt was also accused of carrying out its first airstrike on the rebel stronghold of Donetsk, as Ukraine said it was getting ready to recapture the city.
Poland's Prime Minister Donald Tusk said: "The threat of a direct intervention (by Russia into Ukraine) is certainly greater than it was even a few days ago."
Nato spokeswoman Oana Lungescu added: "This is a dangerous situation."
German Chancellor Angela Merkel called on Russian President Vladimir Putin to use his influence with the rebels to help stabilise the country.
Moscow said making claims about the movement of its troops was like "selling soap bubbles".
Russian defence ministry spokesman Igor Konashenikov said: "Movements of such forces of thousands of troops and equipment are not possible in such a short time."
Nato Secretary General Anders Fogh Rasmussen is visiting Ukraine to hold talks with President Petro Poroshenko.
A man inspects damage after what Donetsk locals described as an 'airstrike'Many EU nations and US politicians blame Russia for the continued escalation of fighting in Ukraine, which resulted in Malaysian Airlines flight MH17 being shot down.
Since the jet was shot down, the EU, US and some other Western nations have engaged in a tit for tat exchange of sanctions with Russia.
Ukraine has made major military advances during the last month and says Donetsk has now almost been cut off from the Russian border and the second rebel stronghold of Luhansk.
More than 285,000 people have fled their homes in the last few months because of the fighting, according to the UN refugee agency UNHCR.
Luhansk is said to be without power, running water, phone connections or fuel, while food supplies have been running low.
Meanwhile, investigators working on the MH17 crash site were forced to suspend their work on Wednesday due to shooting in the area.
Australia's Prime Minister Tony Abbott vowed that those responsible for shooting down the Malaysian airliner and killing all 298 people on board would be brought to justice.
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