Fighting broke out near the railway station at the heart of the rebel stronghold of Donetsk on Monday in what separatists said was an attempt by government forces to seize back the east Ukrainian city.
The government in Kiev denied sending the regular army into the centre of Donetsk, which the separatists captured in April, but said small "self-organised" pro-Ukrainian groups were fighting the pro-Russian rebels in the city.
Four people were killed in clashes near the railway station and close to the airport outside Donetsk, local health officials said in the industrial city which was home to about 1 million people before many fled the fighting in the region.
Four days after a Malaysian airliner was brought down about 60 km (37 miles) away, rebels are jumpy in Donetsk, one of two cities they still hold after being ousted from several towns by the government forces this month.
When a rebel leader reported shooting at the railway station, dozens jumped into minibuses to join the fray and artillery fire sent plumes of smoke skywards.
But almost as quickly as the shelling started, it eased, leaving a control tower at the railway station with shattered windows. By early afternoon, local authorities said the trains were running normally and the station had been only slightly damaged, but a Reuters witness could still hear shelling.
An electricity substation was partially destroyed and people with suitcases were leaving the area.
"It is dangerous near the railway station!" the Donetsk city council said in a statement on its website after the shooting began, asking residents in the area to stay indoors.
It said a nine-storey house had been damaged in the shelling and that transport had been halted in the area.
"In the morning there were explosions, people are extremely worried," said a local resident who gave her name as Natalya.
No army action near crash site
Donetsk is central to the rebel uprising against rule by Kiev, and Ukrainian President Petro Poroshenko has vowed to retake the city as part of what Kiev calls its "anti-terrorist operation" against the separatists.
He has, however, instructed the army not to fight within a 40 km (25 mile) diameter of the site where Malaysia Airlines flight MH17 came down on Thursday, killing all 298 people on board. But that does not cover Donetsk.
A statement from the headquarters of the "anti-terrorist operation" said the army had taken control over a suburb of Donetsk and the president said soldiers were "freeing" the village of Dzerzhinsk, about 60 km north of Donetsk.
Security Council spokesman Andriy Lysenko said work was under way around Donetsk on "clearing approaches to the city, on destroying checkpoints of the terrorists."
"If there are explosions in the middle of the city - then it is not Ukrainian soldiers," he told a news conference.
"We have strict orders not to use air strikes and artillery in the city. If there is fighting in the city, we have information that there is a small self-organised group who are fighting with the terrorists."
The pro-Western authorities in Kiev accuse the rebel fighters of shooting down the airliner. The separatists deny they are to blame.
Earlier on Monday, three members of a Dutch Disaster Victims Identification team arrived in Donetsk, hoping to check the remains of some of the victims of the plane crash. A team of Malaysian officials were also due to arrive on Monday.
The downing of the airliner has intensified calls for the fighting to end in eastern Ukraine.