The White House said President Barack Obama urged Russian President Vladimir Putin in a phone call to agree to a peace deal.
"If Russia continues its aggressive actions in Ukraine, including by sending troops, weapons, and financing to support the separatists, the costs for Russia will rise," the White House statement added.
Nato's top military commander General Philip Breedlove has said the West cannot rule out military action in Ukraine, Reuters reports.
General Breedlove said this would mean providing "weapons or capabilities but not boots on the ground."
He added that "President Putin's plans for Eastern Ukraine are completely unacceptable".
Video footage recorded from Kramatorsk, deep inside Ukrainian-government controlled territory, shows rockets landing on civilian areas.
Video footage appears to show the moment a shell strikes a community soup kitchen in eastern Ukraine.
A mother in eastern Ukraine buries her son - yet another casualty in a civil war that is killing civilians with appalling randomness.