Reuters could not immediately verify the situation in Soledar, a small salt-mining town that has for days been the focus of a relentless Russian assault.
Kyiv and the West have played down the town's significance, saying Moscow sacrificed wave upon wave of soldiers and mercenaries in a pointless fight for a bombed-out wasteland, unlikely to affect the wider war except insofar as the huge losses have sapped manpower on both sides.
But the capture of the town has taken on an outsized importance as it would, if confirmed, give Moscow a trophy for one of the bloodiest campaigns of the war following major battlefield setbacks throughout the second half of 2022.
"The capture of Soledar was made possible by the constant bombardment of the enemy by assault and army aviation, missile forces and artillery of a grouping of Russian forces," Moscow's defence ministry said on Friday.
Seizing the town would make it possible to cut off Ukrainian supply routes to the nearby city of Bakhmut and trap remaining Ukrainian forces there, it said. Moscow has been trying to seize Bakhmut for months.
"The situation in Soledar is near critical - the city is semi-encircled. Only one road is left to supply our troops," said Oleh Zhdanov, a military analyst based in Kyiv.
Zhdanov, speaking in a social media video, said Russia had brought in airborne troops as reinforcements in the battle.
But Serhiy Cherevatyi, spokesperson for Ukraine's eastern military command, told Reuters by telephone that Soledar had not been captured: "Our units are there, the town is not under Russian control."
In an evening video address, Ukrainian President Volodymyr Zelenskiy said fighting for Soledar continued.
"The difficult battle for the Donetsk region continues. The battle for Bakhmut and Soledar, for Kreminna, for other cities and villages in the east of our country continues," Zelenskiy said.
CNN said on its website that a reporting team just outside Soledar could hear mortar and rocket fire on Friday afternoon and saw Ukrainian forces ferrying troops in what appeared to be an organised pullback.
A Ukrainian officer in the area also told Reuters by telephone the Russians had not fully taken the town.
"Last night artillery fire was like from hell, both sides. From what I know, our boys have managed to exit some parts (of Soledar) in an orderly manner and now (assault) groups are counterattacking, but we still hold the town."
Ukrainian officials said on Thursday that more than 500 civilians, including 15 children, were trapped inside Soledar.
After Ukrainian forces drove Russia into humiliating retreats for much of the second half of 2022, the front lines have barely moved for the past two months. Meanwhile, the battles around Bakhmut and Soledar became what both sides called a "meat grinder".
Bakhmut and Soledar are in the Donetsk region, which Russia unilaterally claimed to have annexed in September despite only partly occupying it. The capture of the entire region is widely seen as a Kremlin war objective.
Kyiv's Western allies, however, see it as a fight for marginal gains on a stretch of front where neither side can make a big breakthrough, a sideshow from battles further north and south, where Ukraine hopes to push through Russian lines.
The new year has brought important pledges of extra Western weapons for Ukraine, which is seeking armour to mount mechanised battles against Russian tanks.
Major new announcements of weapons are likely next week, when US Secretary of Defense Lloyd Austin hosts defence chiefs from other allies at a US air base in Germany.
Last week, France, Germany and the United States pledged to send armoured fighting vehicles.
On Friday, Finland joined Poland in saying it could send German-made Leopard tanks to Ukraine as part of a Western coalition apparently being put together to supply them.
That requires the permission of Berlin, which has previously been hesitant but has lately signalled a willingness to allow it.
