The UN Security Council has called on all parties to the conflict in Ukraine to "immediately cease hostilities".

The UN body expressed concern over continued fighting in and around Debaltseve, a key transport hub, between pro-Russian rebels and Ukraine's army, despite a 15 February ceasefire.

"The members of the Security Council called on all parties to immediately cease hostilities and abide by commitments agreed in Minsk, including facilitating access for the OSCE Special Monitoring Mission to monitor and verify compliance with the Minsk Agreements," the council said in a statement.

Pro-Russian separatists have claimed that they have gained control of more than 80% of Debaltseve, which has been gripped by fighting.

"The army of the Donetsk People's Republic controls more than 80% of Debaltseve and continues to push out the Ukrainian army," rebel commander Eduard Basurin said in a briefing.

A Ukrainian military spokesman said some army units are surrounded in Debaltseve in a rare admission by the Ukrainian government of a battlefield setback.

He did not say how many units or soldiers were encircled by pro-Russian separatists who stormed the town.

Earlier, deputy regional police chief Ilya Kiva said separatist fighters were using mortars, rocket propelled grenades and automatic rifles.

"There are wounded and killed but we cannot confirm the numbers yet as the battles are still continuing," Mr Kiva said.

An unnamed rebel military official told the separatists' news agency that insurgents controlled the train station and the eastern outskirts but said it was "not a large part of the town".

Russian news agency Interfax quoted an unnamed rebel source as saying the separatists were conducting "mopping up operations".

The street fighting in Debaltseve represents a new stage in the battle for the strategic town after weeks of fierce clashes around the key location.

Violence has continued unabated in the railway junction that links the two rebel centres of Donetsk and Luhansk despite the official start Sunday of a ceasefire agreed by the leaders of Ukraine, Russia, Germany and France.

Russia and the rebels claim up to 8,000 Ukrainian troops are trapped in the vital transport hub but the government has so far officially refused to accept that its forces are surrounded.

Earlier, government forces and separatists both said they will not carry out an agreement to pull back heavy guns in east Ukraine, pushing a shaky ceasefire closer to collapse.

Fighting has eased in many areas since a ceasefire came into force on Sunday, but the rebels have refused to halt attacks on Debaltseve.

Ukrainian forces say they will not pull back its big guns until the truce holds.

Monitors from the OSCE security group were expected to try to reach the besieged town after Germany said it had agreed steps with the leaders of Russia and Ukraine to ensure the observers had "free access" in the east.

However a call by Berlin for the withdrawal of heavy weaponry to start seemed to have fallen on deaf ears, though officials from Russia, Ukraine, the OSCE and the separatists were expected to discuss implementation of the peace deal by phone.

"We do not have the right (to stop fighting for Debaltseve). It's even a moral thing. It's internal territory," Denis Pushilin, a senior separatist representative, said in the rebel stronghold of Donetsk.

Asked about plans to carry out the agreement to withdraw big guns, he said: "We are ready at any time, we have everything ready for a mutual withdrawal. We will not do anything unilaterally. That would make our soldiers targets."

Ukraine's military reiterated that its forces could also not start withdrawing big weapons such as heavy artillery, as set out in the deal reached at marathon talks brokered by France and Germany in the Belarussian capital of Minsk last Thursday.