The president of Ukraine has accused pro-Russia rebels in the east of the country of shooting down a Malaysia Airlines jet with a ground-to-air missile, killing all 298 people on board as the airliner exploded and rained down in fiery pieces over a rural Ukrainian village.

The huge loss of life threatens to have wide-ranging and unpredictable consequences, coming just after the US imposed further sanctions on Russia for continuing to provide weapons to the rebels. Defence and security experts said the Russian-made Buk surface-to-air missile system, known to be in the hands of pro-Russia fighters in Ukraine, was most likely used.

"This was not an 'incident', this was not a 'catastrophe', this was a terrorist act," said Ukraine's president, Petro Poroshenko.

The US vice-president, Joe Biden, said the plane appeared to have been "blown out of the sky", while the Ukrainian security services released an audio recording said to be rebel commanders realising their forces were responsible.

A partial breakdown of passenger nationalities was released early on Friday, showing that 154 Dutch nationals, 43 Malaysians and 27 Australians were on board, along with nine passengers believed to be from the UK, four each from Germany and Belgium, three from the Philippines, one Canadian and 41 unverified. A group of international HIV/Aids experts flying to Melbourne were among those killed. Included in those numbers were the flight crew of 15, all Malaysian.

The jet, which was flying from Amsterdam to Kuala Lumpur, came down near the village of Grabovo, part of the area controlled by pro-Russia separatists, on Thursday.

It had been flying 1,000ft above restricted airspace, according to the European air traffic control body. Eurocontrol said Ukrainian authorities had banned aircraft from flying at 32,000ft or below and the doomed aircraft had been cruising at 33,000ft – however this apparently still left it within range of the sophisticated surface-to-air weaponry that pro-Russia forces have been using recently in the Ukraine conflict. All civilian flights have now been barred from the area of eastern Ukraine.

Malaysia's prime minister, Najib Razak, said: "If it transpires that the flight was shot down, we insist that the perpetrators must swiftly be brought to justice." His country was sending a disaster response and assistance team to Ukraine.

The Australian prime minister, Tony Abbott, said the world should be "filled with revulsion" at the plane's destruction and said "Russian proxies, using Russian-supplied equipment" may have been responsible. Australia's foreign minister, Julie Bishop, said that if MH17 had been shot down it amounted to an "unspeakable crime" and a full international investigation must be allowed to take place. She said pro-Russia rebels, said to have retrieved the plane's black box flight recording equipment, must hand it over to authorities.

In brief remarks the US president referred to the "terrible tragedy" and said efforts were under way to determine whether Americans had been killed. "The world is watching," he said. "The United States will offer whatever assistance we can to determine what happened and why." John Kerry, the secretary of state, made a statement of condolence and called for a "credible international investigation".

The British foreign secretary, Philip Hammond, said: "We do believe that there were British nationals on board the flight. We are working through passenger data, cross-checking it and referencing it to establish exactly the numbers and identities of those British nationals."

People walk among the debris of Malaysia Airlines flight MH17. Photograph: Dmitry Lovetsky/AP

The field next to the tiny hamlet was a scene of charred earth and twisted metal as shocked local people milled around the scene. Body parts belonging to the 298 people on board were strewn around. The body of what appeared to be a young woman was flung about 500m from the centre of the crash.

US government officials confirmed to media outlets that a surface-to-air missile brought down the plane. US intelligence was reportedly still working to determine the exact location from which the missile was fired, and whether it was on the Russian or the Ukrainian side of the border.

Rebels in the self-declared Donetsk and Luhansk people's republics have shot down several Ukrainian planes and helicopters in recent weeks. But they insisted they had no part in the downing of MH17, claiming instead that Ukrainian fire was responsible.

Credit: Guardian graphics

Ukraine's SBU security services released a recording, which could not immediately be verified, of what it said were rebel commanders saying they had shot down a plane and then discovering with horror it had been a civilian jet.

On the ground in Grabovo, a strong smell of aviation fuel and burnt rubber hung in the air as dozens of pro-Russian separatist fighters milled around to control access to the area in which workers from the emergency services were sifting through the wreckage. A dozen fire engines were on the scene.

One local resident, Alexander, was working in a field a few hundred metres from the crash site. He said he feared the aircraft was going to fall on top of him. Another farmer said he was on his tractor when he heard a loud bang. "Then I saw the plane hit the ground and break in two – there was thick black smoke," he said.

In a conflict that has not been short of unexpected twists, this was by far the most shocking and most gruesome to date. The 298 people aboard MH17 had no connection to the fighting except that their intercontinental flight was travelling through airspace above the battle zone.

Questions were being raised as to why Malaysia Airlines had continued to fly over such a volatile region, where separatists were known to be shooting at aircraft. Qantas, the Australian carrier, said it had been steering clear of the area by 400 nautical miles for several months. Malaysia Airlines said after the crash that it had altered its flight paths and other airlines either did likewise or emphasised they had already been taking alternative routes.

"With immediate effect, all European flights operated by Malaysia Airlines will be taking alternative routes avoiding the usual route," said a statement from the airline. It added: "The usual flight route was earlier declared safe by the International Civil Aviation Organisation. International Air Transportation Association has stated that the airspace the aircraft was traversing was not subject to restrictions."

Throughout the conflict, the versions of violent incidents provided by Kiev and the Donetsk rebels have diverged wildly, with each side blaming the other for loss of life and the shelling of residential areas.

Now, with such a huge and unexpected loss of life, the stakes are immeasurably higher, and both sides again rushed to claim the other was at fault.

Relatives of passengers on Malaysia Airlines flight MH17 wait for information at Kuala Lumpur International airport. Photograph: Manan Vatsyayana/AFP/Getty Images

Those blaming pro-Russia rebels for the attack pointed to a post on a social media site attributed to a top rebel commander which claimed to have downed a Ukrainian transport plane around the same time as the first reports of MH17's disappearance surfaced. The post was later deleted.

The US and EU have blamed Russia for providing the separatists in eastern Ukraine with logistical and military support, leading to a new set of White House sanctions against Russian companies, introduced on Wednesday, as rhetoric coming out of both Washington and Moscow has led to talk of a new cold war. Vladimir Putin's spokesman Dmitry Peskov told the Guardian that any allegations of Russian involvement in the tragedy were "stupidity".

He said the Kremlin would not make a further statement because "no one knows" who is responsible. Asked about the possibility of further US sanctions, Peskov said he could not rule it out: "The United States has recently been conducting a very nonconstructive policy, and their actions are very unpredictable," he said.

Putin himself, who on Thursday returned to Russia from a summit of the Brics nations in Brazil, informed Barack Obama about the incident.

"The Russian leader informed the US president of the report from air traffic controllers that the Malaysian plane had crashed on Ukrainian territory, which had arrived immediately before the phone call," said a statement released by the Kremlin.

According to the statement, the pair spent most of the conversation discussing the deterioration of US-Russian relations, and Putin expressed his "serious disappointment" over the latest round of US sanctions against Russian companies.

Later, Putin chaired a meeting on the Russian economy which began with a minute's silence, and laid the blame for the crash at Ukraine's door: "There is no doubt that the nation over whose airspace this happened bears responsibility for the terrible tragedy," he said.

People stand next to the wrecked undercarriage of Malaysia Airlines flight MH17. Photograph: Dominique Faget/AFP/Getty

Obama said the downing of the plane looked like "a terrible tragedy".

David Cameron, the British prime minister, tweeted: "I'm shocked and saddened by the Malaysian air disaster. Officials from across Whitehall are meeting to establish the facts."

Putin later spoke by phone to the Malaysian prime minister, Najib Razak, to express his "most sincere condolences" to the families of the dead.

The crash came four months after a Malaysia Airlines flight, MH370, vanished on a flight from Kuala Lumpur to Beijing with 239 people on board, two-thirds of them Chinese citizens. It has yet to be found despite a huge search.

The first rumours of improbable tragedy came as video appeared from villages nearby showing huge plumes of smoke rising into the air, and aviation sources told a local wire agency that a plane had been downed.

The first official confirmation came when Anton Gerashchenko, an adviser to Ukraine's interior minister, wrote on his Facebook page that the plane had indeed crashed in Ukrainian territory, claiming it had been hit by a missile fired from a Buk launcher.

Malaysia Airlines soon confirmed the worst fears, noting via its Twitter feed: "Malaysia Airlines has lost contact of MH17 from Amsterdam. The last known position was over Ukrainian airspace."

Igor Sutyagin, a Russian military specialist at the London-based Royal United Services Institute, agreed that the plane would almost certainly have been hit from a Buk, a vehicle-mounted missile system first developed in the Soviet era. The Malaysian aircraft,was beyond the range of Manpads – shoulder-launched missiles. Kalashnikov-carrying Russian sympathisers in Ukraine would not have had the expertise to fire them and would have needed either specialists who had "volunteered" their services from Russia or locally recruited specialists, he said, but noted that the rebels had been firing at Ukrainian aircraft over the last week.

The Associated Press said one of its journalists had seen a similar launcher near the town of Snizhne earlier on Thursday.

Russia's state-owned Channel One avoided speculation of who might have been behind the plane crash in its first bulletins on the subject, while the Kremlin-friendly Life News, whose reporters were first on the scene, said it was likely to have been brought down by Ukrainian fire, claiming that the rebels did not have any missile systems with the capacity to down a plane travelling at that altitude.

However, a report on the website of Russian state television from late June described how the rebels in Donetsk had taken control of a Ukrainian missile defence facility which was equipped with Buk systems. The report said that the rebels planned to "defend the sky over Donetsk" using the missile system.

On Thursday afternoon a social media site attributed to Igor Strelkov, a Russian citizen who has emerged as the commander of rebel forces in Donetsk, announced that the rebels had shot down an An-26 Ukrainian transport plane, and also that there was "information about a second plane". The post was later removed.

'It's a civilian'

On Thursday night audio was being circulated on social media, apparently released by Ukrainian security services, purporting to be an intercepted conversation of pro-Russian rebels confirming they had shot down a civilian jet.

The conversation is apparently between a group leader and his superior and suggests that they initially thought they had brought down a military aircraft but later realised their error.

The group leader, "Demon", tells his boss: "A plane has just been shot down. [It was] 'Miner's' group. It crashed outside Enakievo. Our men went to search for and photograph it. It's smouldering."

After his men apparently inspect the crash site, Demon reports back. "Cossacks from the Chernunkhino checkpoint shot down the plane. The plane disintegrated in mid-air … they found the first body. It's a civilian."

He carries on: "I mean. It's definitely a civilian aircraft."

His superior, nicknamed "Greek", asks him: "Were there many people?"

Demon replies: "A fuckton. The debris rained right into the yards."

Greek asks: "What's the aircraft?" and is told: "I haven't figured it out yet. I haven't reached the main section. I only looked at where the bodies began to fall. There are remains of chair mounts, the chairs, the bodies."

Greek asks: "Any weapons there?" and Demon says: "None at all. Civilian things, medical stuff, towels, toilet paper." "Any documents?" asks Greek, and Demon, perhaps realising what has just happened, replies: "Yes, an Indonesian student from [a US] university."

Additional reporting by Tania Branigan in Beijing, Ewen MacAskill in London and Paul Lewis in Washington

• This article was amended on 18 July 2014. An earlier version had the word "Kazakhs" where it should have said "Cossacks".