The Ukrainian president says his forces are making an "organised" withdrawal from the embattled town of Debaltseve. Petro Poroshenko said 80% of Ukraine's troops left on Wednesday morning, with more to follow.
Fighting has raged over the transport hub, with pro-Russian rebels seizing control of most areas, despite a ceasefire deal.
Russia's foreign minister said Ukrainian forces had been encircled and were forced to battle their way out.
"I'm reckoning that common sense will prevail," said Sergei Lavrov as he urged the rebels to provide troops who surrendered with food and clothes.
Earlier, US Vice-President Joe Biden accused Russia of violating the accord, agreed in Minsk last week.
Mr Lavrov told reporters that the rebel attack in Debaltseve did not violate the ceasefire agreement, because the town was part of the rebel-held area at the time the peace deal was signed.
Eyewitnesses saw dozens of tanks and columns of weary Ukrainian troops retreating from Debaltseve on Wednesday.
"This morning the Ukrainian armed forces together with the National Guard completed an operation for a planned and organised withdrawal from Debaltseve," the Ukrainian president said in a statement before travelling to the frontline in the east.
"As of now we can say that 80% of our units have left," he said, adding that the troops were not encircled.
"We are expecting another two columns [to leave]."
Kiev has admitted that some soldiers were taken prisoner in Debaltseve, but gave no details on how many were seized.
Meanwhile, rebel military spokesman Eduard Basurin said hundreds of Ukrainian soldiers there had given themselves up - something the president denied.
The withdrawal comes after Russian President Vladimir Putin urged Ukraine's troops in Debaltseve to surrender.
Mr Putin is due to speak by telephone later to German Chancellor Angela Merkel, France's Francois Hollande and President Poroshenko, according to the French government.
Spokesman Stephane Le Foll insisted the agreement announced last week by the four leaders to end the fighting in eastern Ukraine was not dead, and that progress had been made.
Meanwhile a spokesman for Mrs Merkel condemned the rebel action in Debaltseve, saying it was a clear violation of the truce but that it was too early to determine whether that had failed. (BBC)
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