Ukrainian forces have shelled parts of the rebel-held town of Luhansk near the Russian border, Russia's Itar-Tass news agency has reported, quoting rebels in the town.
President Petro Poroshenko tweeted that his "order is now in effect - tighten the ring around the terrorists."
Mr Poroshenko added that Ukrainian forces would "continue the operation to liberate Donetsk and Luhansk regions."
In a statement interior minister Arsen Avakov said "we have a plan of action ... we will move forward everyday."
Ukrainian security officials also said they were in full control of the eastern city of Slaviansk after re-taking it from pro-Russian separatists yesterday.
Mr Poroshenko said the victory could mark a turning point in the fight against the separatists.
There were no immediate casualty figures available, though Ukrainian security officials said there had been no deaths on the side of government forces.
"Ukrainian forces fully control the towns of Slaviansk and Kramatorsk," Andriy Lysenko, an official of the "anti-terrorist operation", told journalists.
He said the government had begun to rebuild the town's shattered infrastructure and ensure food and drinking water for residents.
Slaviansk had been the strongest base of militants fighting government forces in mainly Russian-speaking eastern Ukraine in what has been a source of great tensions between the West and Russia.
Its 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.
Speaking in a televised address on last night, Mr Poroshenko hailed the victory as a significant symbolic moment.
"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," he said.
He said hostages held there by the separatists had been released and a significant amount of weapons had been seized.
But he warned that the rebels were re-grouping in other big towns and he said he himself was far from euphoric.
"There are further tests ahead," he said.
Many of the hundreds of armed rebels who fled Slaviansk and Kramatorsk, 20km to the south, went to Donetsk, the main industrial hub in the region where separatists first declared a "people's republic" and declared their wish to join Russia.
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 illegitimate.
The crisis began when street protests ousted Moscow-backed Viktor Yanukovych 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.
Talks in Berlin last week involving the foreign ministers of Ukraine, Russia, Germany and France had set yesterday as the day for talks between a contact group representing Ukraine, Russia and the OSCE security watchdog, and separatist leaders.
The talks were to have been aimed at working out an effective ceasefire observed by the opposing sides. Mr Poroshenko declared a week-long unilateral ceasefire on 20 June which he renewed for a further three days.
But he refused last Monday to extend it any further, citing numerous violations by the rebels, and sent government forces onto an offensive against the rebels.
Russia has denied allegations by Kiev that it has been fanning the separatist rebellions by allowing weapons and fighters to cross over the long joint border to support the separatists.
It has been pressing Mr Poroshenko to engage in talks with the separatists and agree on a ceasefire.