The proclamation of Russian rule more than 15 per cent of Ukraine - the biggest annexation in Europe since World War II - was roundly rejected by Ukraine and Western countries as illegal. The United States, Britain and Canada announced new sanctions.
Ukrainian President Volodymr Zelenskiy said his country had submitted a fast track application to join the NATO military alliance and that he would not hold peace talks with Russia while Putin was still president.
Putin's proclamation coincided with Russian forces in one of the four regions being annexed facing encirclement by Ukrainian troops, showing how tenuous Russia's grip is on some of territory it is claiming.
In one of his toughest anti-American speeches in more than two decades in power, Putin signalled he would continue what he called a battle for a "greater historical Russia", slammed the West as out to destroy Russia and, without evidence, accused Washington and its allies of blowing up the Nord Stream gas pipelines.
But US President Joe Biden said it "was a deliberate act of sabotage and now the Russians are pumping out disinformation and lies", adding Washington and its allies would send divers to find out what happened.
The four Ukrainian regions - Donetsk, Luhansk, Kherson and Zaporizhzhia - that Putin said Russia was absorbing had made a historic choice, Putin said.
"They have made a choice to be with their people, their motherland, to live with its fate, and to triumph with it. Truth is on our side. Russia is with us!" Putin told his country's political elite, who gathered in one of the Kremlin's grandest halls on Friday to watch him sign the annexation documents.
Russia organised so-called referendums, which were denounced by Kyiv and Western governments as illegal and coercive.
"We will defend our land with all our strength and all our means," he added, calling on "the Kyiv regime to immediately cease hostilities and return to the negotiation table".
In Ukraine, Zelenskiy said he was only ready for peace talks if and when Russia had a new president.
He also said Ukraine was formally applying for fast-track membership of NATO, something Moscow fiercely opposes, and accused Russia of redrawing borders "using murder, blackmail, mistreatment and lies".
Putin said the United States had set a precedent when it had dropped two atomic bombs on Japan in 1945, while stopping short of issuing new nuclear warnings against Ukraine himself.
US Secretary of State Antony Blinken said the United States had not yet seen Russia take any action that suggested it was contemplating using nuclear weapons, despite Putin's "loose talk".
Biden said new US sanctions would hurt those who provided political or economic support to the annexation drive.
"We will rally the international community to both denounce these moves and to hold Russia accountable," Biden said in a statement, promising to continue to supply Ukraine with equipment to defend itself.
NATO chief Jens Stoltenberg accused Putin of provoking "the most serious escalation" of the war since Russia invaded on February 24, but said he would not succeed in stopping the alliance supporting Kyiv.
A US-Albanian resolution at the UN Security Council condemning Russia's proclaimed annexation of parts of Ukraine was rejected on Friday after Russia exercised its veto.
Washington will now ask the 193-member UN General Assembly to condemn the declared annexation and referendums.
In eastern Donetsk, Russia's garrison in the town of Lyman was in serious trouble, with reports from both sides saying Russian forces were nearly surrounded.
Ukraine said it had all the supply routes to the Russian stronghold in the crosshairs of its artillery in the east, and told Moscow it would have to appeal to Kyiv if it wanted its forces to be allowed out.
The encirclement could leave Ukrainian forces an open path to seize more territory in Luhansk and Donetsk provinces, captured earlier in some of the war's bitterest fighting.
