Ukraine's acting President Olexander Turchynov has admitted his forces are "helpless" to quell unrest driven by pro-Russian activists in the eastern regions of Donetsk and Luhansk.
Mr Turchynov said the goal was now to prevent the unrest spreading.
Activists have seized scores of government buildings and taken hostages including international monitors.
Mr Turchynov also said Ukraine was on "full combat alert", amid fears Russian troops could invade.
"I would like to say frankly that at the moment the security structures are unable to swiftly take the situation in the Donetsk and Luhansk regions back under control," he said during a meeting with regional governors.
He admitted security personnel "tasked with the protection of citizens" were "helpless".
"More than that, some of these units either aid or co-operate with terrorist groups," he said.
Mr Turchynov added: "Our task is to stop the spread of the terrorist threat first of all in the Kharkiv and Odessa regions."
IMF warningThe acting president said that the tens of thousands of Russian troops stationed just over the border meant that "the threat of Russia starting a war against mainland Ukraine is real".
Russia, which annexed the Crimea region from Ukraine last month, has consistently said it has no plans to invade the east.
President Vladimir Putin also insists there are "neither Russian instructors, nor special units nor troops" inside Ukraine.
Eastern Ukraine, which has a large Russian-speaking population, was a stronghold for former President Viktor Yanukovych before he was overthrown by protesters in February.
Pro-Russian activists there continue to detain some 40 people, including seven military observers linked to the Organization for Security and Co-operation in Europe (OSCE) seized last week.
Activists continue to storm buildings in the east - on Wednesday they took the regional police building and town hall in the city of Horlivka, local officials said.
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US Secretary of State John Kerry warns Russia over Ukraine
The US and EU have accused Russia of failing to implement the terms of a deal agreed in Geneva aimed at defusing the crisis by disarming illegal militias.
They have both stepped up sanctions against Russia this week, naming more individuals and companies facing travel bans and asset freezes.
Moscow blames Kiev for the unrest and has condemned the sanctions.
Separately on Wednesday, the International Monetary Fund (IMF) said Russia was "experiencing recession now" because of damage caused by the Ukraine crisis.
It predicts $100bn (£59bn) will leave the country this year. Russia's central bank said recently that foreign investors had withdrawn $64bn in the first three months of 2014.
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