KIEV - At least two people were killed and several injured on Monday in an explosion in Luhansk which separatists controlling the eastern Ukrainian city said was the result of an air strike by the Ukrainian military.

This was denied by the Kiev side, which said it was caused by separatists who had launched a heat-seeking rocket at a Ukrainian plane but the missile had zeroed in instead on the rebel-occupied regional administration building.

A video clip published by local people on a Russian social media page showed two bodies lying in parkland near the main regional building, one of them that of a woman.

"The number of casualties is still being determined, but it is already known for sure that there are two dead," a local health official, Pavel Malysh, told Interfax-Ukraine news agency. Interfax quoted unnamed separatist sources as giving a higher death toll of five.

The video showed a man pumping the chest of a prone victim to resuscitate him while other people carried other casualties in makeshift stretchers made of blankets.

Malysh quoted eyewitnesses as saying more than 10 wounded had been taken to the main regional hospital.

Earlier, defence analyst Dmytro Tymchuk, who is seen as having reliable military sources, said Ukrainian security chiefs had begun a "full-scale operation to neutralise terrorist groups" in Luhansk.

Vladyslav Seleznyov, a spokesman for the operation against the separatists, denied there had been any air strike against the regional administration offices.

But he acknowledged air strikes against two separatist checkpoints in Luhansk region.

"We destroyed two checkpoints in Luhansk region. When the plane was turning back, they (the separatists) tried to shoot it down. A heat-seeking device was launched but it turned out that it fell on the fighters themselves and destroyed part of the wall of the administration building," he told Ukrainska Pravda online newspaper.

Separatists had fired the missile from the roof of the state security building they are occupying but it homed in on the main administration building, also held by the rebels, a senior military official, Aleksander Rozmaznin, was quoted by Interfax as saying.

Ukraine's eastern region has been riven with separatist armed rebellion for the past two months which the Kiev government says is fomented by Russia. It says fighters from Russia are fighting alongside rebels against Kiev.

The Russian Foreign Ministry called the Luhansk incident an air strike. "The authorities in Kiev have committed another crime against their own people," a statement on the ministry's website said.

EARLY MORNING ATTACK

In Luhansk, a depressed industrial city of about half a million close to the border with Russia, an armed group calling itself the People's Army of the East seized the main administration and other buildings in early April and hoisted the Russian flag.

Monday's explosion came after pro-Russia separatist militia launched a fierce early morning attack with automatic weapons and grenade launchers on a Ukrainian border post on the edge of the city.

The location of the fighting underscored Kiev's concern over the vulnerability of its border with Russia.

Security sources said a force of separatists occupied the upper floors of an apartment block and fired into the border post.

The battle was still raging on Monday evening, more than 14 hours after it started. A border post spokesman, Oleh Slobodyan, said early in the day there were eight or nine wounded among the Ukrainian forces in the border post while the attackers had five dead and eight wounded.

There was no independent confirmation of the figures and with fighting continuing well into the evening a higher casualty toll seemed likely.

Speaking of the city centre explosion, a separatist fighter named Alexander Gureyev said by telephone: "A fighter plane shot at the regional administration. There are dead and injured in the city". Another separatist fighter named Denis gave a similar account.

A spokeswoman called Elena said ambulances had been called to the administration building. "There was a small fire for a period of time, but it's out now. Several ambulances came to the building to take away the wounded", she said.