Pro-Russia activists have stormed several official buildings in the eastern Ukrainian city of Luhansk.
They seized the regional government's headquarters and prosecutor's office before opening fire with automatic weapons at the main police station.
Interim President Olexander Turchynov criticised local police for their "inaction" and "criminal treachery".
The US accused Russia of seeking to "change the security landscape" of Eastern and Central Europe.
In a speech at the Atlantic Council in Washington, Secretary of State John Kerry told the Kremlin to "leave Ukraine in peace" and warned: "Nato territory is inviolable we will defend every single inch of it."
In other developments on Tuesday:
A conference in London heard allegations that Ukraine's ousted President Viktor Yanukovych and his associates may have stolen assets worth tens of billions of dollars
Ukraine's Interior Minister Arsen Avakov told BBC Russian that voting in next month's presidential election may not be able to take place in all regions because of the unrest
'No control'
Moscow has said it has no intention of invading eastern Ukraine, where pro-Russia activists have seized government buildings in more than a dozen towns and cities.
Until now, only the local office of the State Security Service (SBU) in Luhansk, a city of 465,000 people less than 30km (20 miles) from the Russian border, had been targeted.
But on Tuesday afternoon, hundreds of people shouting "Russia, Russia" gathered outside the headquarters of the regional government to demand a referendum on greater autonomy.
Pro-Russia activists reportedly opened fire at Luhansk's police headquarters to force officers to surrender
Earlier, men armed with sticks and metal bars stormed the regional administration's headquarters
A small group broke windows to gain access to the building, which was not protected
Once inside, they opened the building's main entrance to allow in demonstrators gathered outside
Inside the courtyard, the activists found dozens of security personnel in riot gear
The Ukrainian flag was replaced by a Russian tricolour and the flag of Donetsk People's Republic
A group of men armed with sticks and metal bars broke into the building. They pulled down the Ukrainian flag flying from the roof and replaced it with a Russian tricolour and the flag of Donetsk People's Republic.
Crowds of pro-Russia activists then overran the building housing the prosecutor's office before attacking the headquarters of the interior ministry's police force.
Hours later, an AFP news agency journalist reported that officers had abandoned the police station and been taken away in buses, as an angry crowd shouted at them to "Go home".
Activists also went into a regional television station, but decided not to take it over after they were allowed to make a live broadcast.
Following the takeovers, President Turchynov demanded the dismissal of the police chiefs in Luhansk and the other eastern city of Donetsk.
"The overwhelming majority of law enforcement bodies in the east are incapable of fulfilling their duty to defend our citizens," he said.
Pro-Russia activists control much of the neighbouring Donetsk region.
Sanctions
Eastern Ukraine, which has a large Russian-speaking population, was a stronghold for former President Yanukovych before he was overthrown by protesters in February.
The interim government has rejected the pro-Russian activists' demands for greater autonomy, fearing they could lead to the break-up of the country or more regions being annexed by Russia, as happened with Crimea last month.
Pro-Russian activists continue to detain some 40 people, including seven military observers linked to the Organisation for Security and Co-operation in Europe (OSCE) seized last week.
On Tuesday evening, the self-styled "mayor" of the town of Sloviansk, where the observers are being held, said "good progress" had been made at talks with OSCE representatives.
Vyacheslav Ponomaryov had earlier warned that they would only be released if the EU dropped its sanctions against separatist leaders.
Earlier, the EU published a fresh list of 15 individuals facing travel bans and asset freezes.
Sloviansk resident: "I think that it should end in a peaceful way"
It included the chief of the Russian General Staff, the head of Russian military intelligence, and a Russian deputy prime minister, as well as separatist leaders in Crimea, Luhansk and Donetsk.
On Monday, the US announced sanctions against seven individuals and 17 companies it said were linked to President Putin's "inner circle".
President Putin warned that new sanctions might have an impact on the operations of Western companies in Russia.
"If this continues, we will of course have to think about how they work in the Russian Federation, including in key sectors of the Russian economy such as energy," he said, adding that there were "neither Russian instructors, nor special units, nor troops" in Ukraine.
US Treasury Secretary Jack Lew said the sanctions, first imposed by Washington and Brussels after Crimea was annexed, had so far caused "a quite substantial deterioration in Russia's already weak economy".
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