Troops recaptured two rebel-held towns near the crash site and were trying to take the village of Snezhnoye, near where Kiev and Washington say rebels fired the surface-to-air missile that shot down the airliner with loss of all 298 on board, Ukrainian officials said.
One pro-government militia said 23 of its men had been killed in fighting in the past 24 hours, while a rebel commander said he had lost 30 soldiers.
Analysis of black box flight recorders from the airliner showed it was destroyed by shrapnel from a missile blast which caused a "massive explosive decompression", a Ukrainian official said on Monday.
Investigators in Britain, who downloaded the data, had no comment. They said they had passed information to the international crash investigation led by the Netherlands, whose nationals accounted for two-thirds of the victims.
In a report on three months of fighting between government forces and separatist rebels who have set up pro-Russian "republics" in the east, the United Nations said more than 1,100 people had been killed.
U.N. High Commissioner for Human Rights Navi Pillay said increasingly intense fighting in the Donetsk and Luhansk regions was extremely alarming and the shooting down of the Malaysian airliner on July 17 may amount to a war crime.
Western leaders say rebels almost certainly shot the airliner down by mistake with a Russian-supplied surface-to-air missile. Russia accuses Kiev of responsibility.
The separatists are still in control of the area where the plane was shot down but fighting in the surrounding countryside has been heavy as government forces try to drive them out.
On Monday at least three civilians were reported killed in overnight fighting, and Kiev said its troops recaptured Savur Mogila, a strategic piece of high ground about 30 km (20 miles) from where the Malaysia Airlines Boeing hit the ground, and other areas under rebel control. Rebels denied Savur Mogila had been lost, saying fighting was continuing.
MILITARY OPERATIONS
A spokesman for Ukraine's Security Council, Andriy Lysenko, said Kiev was trying to close in on the crash site and force the rebels out of the area but was not conducting military operations in the immediate vicinity.
He said Ukrainian troops were now in the towns of Torez and Shakhtarsk, both formerly held by the rebels, while fighting was in progress for Snezhnoye and Pervomaisk. The towns are all located in rolling countryside near the wheat and sunflower fields filled with debris from the downed airliner.
Government troops were also readying an assault on Gorlovka, a rebel stronghold north of the provincial capital Donetsk.
"The Ukrainian military is conducting an active assault on regions under temporary control of Russian mercenaries," Lysenko told a news conference in Kiev.
In Donetsk, local officials said artillery fire had damaged residential blocks, houses, power lines and a gas pipeline. The city, with a pre-war population of nearly 1 million, has largely become a ghost town since rebels dug in for a stand in the face of advancing Ukrainian troops.
In Luhansk, another rebel stronghold, local officials said 93 civilians had been killed in the last month's fighting.
The site of the crash of the Malaysian airliner has yet to be secured or thoroughly investigated, more than 10 days after the crash. After days in which bodies lay untended in the sun, rebels gathered the human remains and shipped the bodies out, and turned over the flight recorders to a Malaysian delegation.
But the wreckage itself is still largely unguarded, and much of it has been moved or dismantled in what the rebels say was part of the operation to recover the bodies. No full forensic sweep has been conducted to ensure all human remains have been collected. Both side accuse the other of using fighting to prevent the investigation.
The Organization for Security and Co-operation in Europe said its observers attempting to reach the crash site with investigators from Australia and the Netherlands were forced to return to Donetsk for "security reasons".
A rebel leader, Vladimir Antyufeyev, told reporters in Donetsk that separatist fighters escorting the international experts to the site encountered fighting and turned back.
Antyufeyev, who like most of the senior rebel leadership is an outsider from Russia, also blamed the "senseless" Ukrainian army for trying to destroy evidence at the crash site under cover of fighting.
He said government forces were advancing on Donetsk with the aim of encircling the city.
FURTHER SANCTIONS
The downing of the Malaysian airliner has led to calls for much tougher action against Russia from Western countries who had previously imposed sanctions but only on small numbers of individuals and firms.
European Union member states were expected to try to reach a final deal on Tuesday on stronger measures that would include closing the bloc's capital markets to Russian state banks, an embargo on future arms sales and restrictions on energy technology and technology that could be used for defence.
The EU added new names on Friday to its list of individuals and companies facing travel bans and asset freezes over their alleged involvement in Ukraine. It could agree to extend the list further as early as Monday.
Germany, which had been reluctant to agree tougher sanctions because of its trade links with Russia, said the downing of the airliner meant such measures were now necessary.
The leaders of Britain, France, Germany, Italy and the United States agreed on Monday that they would take further measures against Russia over Ukraine, France said.
Russia played down the impact of sanctions.
"We can't ignore it. But to fall into hysterics and respond to a blow with a blow is not worthy of a major country," Foreign Minister Sergei Lavrov said.
Washington says Moscow has stepped up its support for the rebels since the plane was shot down, including sending more heavy arms and firing across the frontier. The Russian Defence Ministry cast doubt on pictures Washington said showed Russia had shelled Ukrainian military positions.
(Additional reporting by Natalia Zinets in Kiev, Jane Wardell in Sydney, Alexei Anishchuk and Thomas Grove in Moscow, and Anthony Deutsch in Amsterdam; Writing by Giles Elgood; Editing by Peter Graff)
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