The US has accused Russia of violating the Minsk agreement on Ukraine, as the UN Security Council voted unanimously to approve the ceasefire deal.
Vice-President Joe Biden said "the costs to Russia will rise" if it continued to violate the accord.
Fighting is continuing around the strategic town of Debaltseve, with pro-Russian rebels saying they now control most areas.
Media reports say some Ukrainian troops are withdrawing from the town.
It comes after Russian President Vladimir Putin urged Ukraine's troops there to surrender.
'Stop pretending'
Although the Security Council unanimously approved a Russian-drafted resolution to endorse the Minsk ceasefire deal agreed in Belarus last week, angry words were exchanged among ambassadors.
US Ambassador Samantha Power welcomed the agreement but said that Russia had to prove its commitment to peace.
She said: "Stop arming the separatists. Stop sending hundreds of heavy weapons across the border in addition to your troops. Stop pretending you are not doing what you are doing."
She added: "Russia signs agreements then does everything within its power to undermine them. Russia champions the sovereignty of nations and then acts as if a neighbour's borders do not exist."
Russian Ambassador Vitaly Churkin called her comments "offensive".
"Since the very start of the crisis, Russia has actively called for a peaceful settlement through inclusive, transparent dialogue between all sides in the internal Ukrainian conflict," he said.
After speaking to Ukrainian President Petro Poroshenko, Mr Biden said he "strongly condemned the violation of the ceasefire by separatist forces acting in concert with Russian forces, in and around the town of Debaltseve".
He added: "If Russia continues to violate the Minsk agreements... the costs to Russia will rise."
Mr Poroshenko described rebel attempts to take the town as a "cynical attack" on the ceasefire.
Russian and Ukrainian media and a Ukrainian battalion commander say some of Ukraine's troops have begun to withdraw from Debaltseve. However, these reports have not yet been confirmed by the government.
International observers monitoring the truce have been unable to enter the town.
It has become a key prize for rebels and government forces, as it sits on a strategic railway line linking rebel-held Donetsk and Luhansk.
Analysis: Paul Adams, BBC News, Kramatorsk
The wealth of claim and counter-claim around Debaltseve speaks volumes. It's hard to confirm any of Tuesday's stories.
Controversy surrounds the fate of dozens of government troops - rebel sources say they surrendered, while the army contends they were captured after running out of ammunition during an ambush.
The rebels say Debaltseve is not covered by the ceasefire agreement reached last week in Minsk and continue to insist that it's an "internal" matter. Between April and July last year, the town was in rebel hands. It sits astride the railway line linking two rebel strongholds, Donetsk and Luhansk.
Ukrainian TV has shown pictures of text messages sent to government soldiers in Debaltseve, allegedly from Russia. "Poroshenko and his generals have betrayed you," the messages read, referring to the Ukrainian president. "There's no need for you to die for them."
Speaking on a visit to Hungary, Mr Putin urged Ukraine to allow its troops there to surrender and said he hoped the rebels would let any captured troops return to their families.
"I hope that the Ukrainian authorities are not going to prevent the Ukrainian soldiers from laying down their weapons."
Trapped civilians
Earlier, sources in the self-proclaimed Donetsk People's Republic (DPR) said Debaltseve police station and railway station had been taken, and at least 80% of the city was under rebel control.
Other reports said the city's military HQ - where many government troops are based - has also been surrounded.
Most of its 25,000 population has been evacuated but about 7,000 civilians are still believed trapped by the fighting.
"One has to be really concerned about what's happening to them right now," said Rupert Colville, spokesperson for the UN High Commissioner for Human Rights.
"As far as we're aware, they're sort of hiding down in cellars - probably a few thousand people... struggling to get food... a shortage of water, and heavy fighting going on above their heads."
The ceasefire, which came into effect on Sunday, has been broadly observed but separatists insist the agreement does not apply in Debaltseve because they have the town almost surrounded.
Both sides have also failed to pull back heavy weapons from the front line.
The withdrawal was due to start no later than the second day after the truce came into effect and be completed within two weeks, creating buffer zones 50-140km (30-85 miles) wide.
The UN says more than 5,600 people have been killed in the conflict since April, but there are fears the actual death toll could be much higher.
BBC
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