By Anton Zverev

DONETSK, Ukraine (Reuters) - Pro-Russian rebels said on Monday they would open a safe corridor for Ukrainian troops out of the encircled town of Debaltseve in east Ukraine on condition they surrender the territory, an offer the Kiev military promptly rejected.

Despite a ceasefire negotiated last week, Debaltseve, a government-held railway junction town, has been the site of heavy fighting between rebels and thousands of Ukrainian troops who are effectively trapped in the city.

Ukrainian military commentators say the number of encircled Ukrainian soldiers could be as high as 7,000.

"We suggest that the Ukrainian soldiers in Debaltseve stay alive. There is just one condition: that they lay down their weapons. We didn't talk about them becoming prisoners. Lay down your weapons and get out of here," said commander Eduard Basurin.

Kiev military spokesman Vladislav Seleznyov said government troops would not leave as the town lies within territory under Ukrainian control in accordance with the ceasefire deal reached in Minsk last week.

"There are the Minsk agreements, according to which Debaltseve is ours. We will not leave," he said by phone.

The Organization for Security and Cooperation in Europe said on Sunday its monitors in eastern Ukraine were turned back from Debaltseve, and rebels said a ceasefire agreed in Minsk last week did not apply to the strategically-located town.

Washington says the rebel operation around the town, which saw heavy mortar bombing on Monday, is being assisted by Russian armed forces, something Moscow denies.

(Additional reporting by Pavel Polityuk; Writing by Thomas Grove and Alessandra Prentice; Editing by Sonya Hepinstall)