Ukraine's government said it would quickly seize more territory from pro-Russian separatists after re-taking their stronghold of Slaviansk in what President Petro Poroshenko called a turning point in the fight for control of the country's east.
"My order is now in effect - tighten the ring around the terrorists," Poroshenko tweeted on Sunday. "Continue the operation to liberate Donetsk and Luhansk regions," he said, naming Ukraine's two major eastern parts which have boiled with separatist rebellion since April.
There were no immediate figures for casualties caused by the government offensive in Slaviansk, launched after Poroshenko refused to renew a unilateral ceasefire and ordered the resumption of a government offensive on June 30.
In Slaviansk, where Ukrainian forces had been tightening their grip for more than a month, around 200 residents lined up in the city's central square for meat, potatoes, onions and bread distributed by troops.
"Everything is different now. Tonight is the first night with no shelling," said Mikhail Martynenko, 58, a guard at a local market near Slaviansk.
"People are in a better mood and there are more people on the streets. Everyone was afraid. They had no idea when another mortar would come flying," he said.
Under rebel commander Igor Strelkov, a Muscovite declared defence minister of the self-proclaimed Donetsk People's Republic, Slaviansk had put up some of the fiercest resistance to Ukrainian forces, bringing down at least three military helicopters and one Antonov-30 intelligence plane.
Slaviansk's re-capture represents Kiev's most notable military victory in three months of fighting in which more than 200 Ukrainian troops have been killed as well as hundreds of civilians and rebels.
"This is not full victory. But the clearing out of people armed to the teeth from Slaviansk has huge symbolic importance. It is the beginning of the turning point in the battle with fighters for the territorial integrity of Ukraine," said Poroshenko.
He said hostages held there by the separatists had been released and a significant number of weapons had been seized.
But he said the rebels were re-grouping in other big towns and he was far from euphoric.
"There are further tests ahead."
Rebel commander Strelkov said between 80 and 90 percent of the rebels in Slaviansk had escaped the city but that a mistake had cost the lives of a number of the militants who had carried out a diversionary attack during the escape, Interfax reported.
Ukrainian forces said they now had full control of Slaviansk and the nearby town of Kramatorsk. Many rebels appeared to have retreated towards Donetsk, the east's main industrial hub where separatists first declared a "people's republic".
Strelkov, whose exact whereabouts are unclear, said he intended to prepare Donetsk for active defence and said the city was "much easier to defend than little Slaviansk".
More than 1,000 pro-Russian separatists and their supporters gathered on Donetsk's central Square on Sunday. The mayoral office warned of armed people in the city.
"On the streets of the city, there is a large number of people in camouflage and weapons. A request to residents: do not enter into conflicts with them and when possible avoid areas where armed people are congregated"
In Slaviansk and neighbouring areas, Andriy Lysenko, a senior official of Ukraine's "anti-terrorist operation", said scores of rebels were surrendering and providing information on locations of rebel units and weapons.
Deputy security council chief Mykhailo Koval said blockades were being prepared around the capitals of the two separatist regions, Donetsk and Luhansk.
"A complete blockade will be carried out on these cities and corresponding actions will lead to the separatists and bandits being forced to lay down their weapons," Interfax reported him as saying.
Moscow, which has already come under economic sanctions from the West, denies Western and Ukrainian accusations it has been backing the insurrection, possibly with a view to dismembering the former Soviet republic.
The uprisings in eastern Ukraine erupted in April as rebels took over state buildings, built a powerful arsenal of seized weapons and declared their independence from Kiev, calling the pro-European government in Kiev illegitimate.
The crisis began when street protests ousted Moscow-backed Viktor Yanukovich in late February for rejecting a landmark political and trade deal with the European Union in favour of closer ties with Russia.
Russia subsequently annexed Crimea and separatist revolts against the new Kiev authorities broke out with rebels declaring "people's republics" and saying they wanted to join Russia.