Ukraine's shaky truce was rattled further as warring rivals traded blame over the bloodiest day in the restive east since a ceasefire was signed on September 5.
Gunfire erupted around the airport in the main rebel-held city of Donetsk, a day after six civilians were killed in shelling near a market, and international observers came under fire.
Government forces and pro-Russian separatists accused each other of violating the ceasefire, the first backed by both Kiev and Moscow since fighting erupted across Ukraine's industrial heartland in April.
Despite the surge in violence, President Petro Poroshenko unveiled legislation offering parts of the separatist east limited self-rule for three years, under the terms of the truce signed in Minsk.
The proposals would also extend Russian-language rights in the Donetsk and Lugansk regions, allow them to strengthen ties with neighbouring Russia and to hold local elections in November.
Poroshenko insisted his proposals guaranteed "the sovereignty, territorial integrity and independence of our state", although rebel leaders have said they still want nothing less than full independence.
Kiev also plans to offer amnesty to some separatist militants as part of the peace plan aimed at halting a conflict that has cost more than 2700 lives and sent at least half a million fleeing their homes.
The legislation is expected to be submitted to parliament this week, when lawmakers are also set to ratify an agreement for closer trade ties with the EU which Russia opposes.
Poroshenko has called the planned simultaneous ratifications by the Ukrainian and European parliaments a "historic moment" that will define his country's westward-looking future.
The decision by his predecessor, Kremlin-backed Viktor Yanukovych, to spurn the same EU pact set off months of street protests that led to his ouster. Russia retaliated by annexing Crimea and backing the eastern uprising.
However, in what some see as a concession to Moscow, a free trade deal under the pact with the EU will be delayed until 2016.
On the ground, tensions were still high after violence left an unconfirmed number of soldiers dead or injured.
The pan-European OSCE security body said vehicles carrying six of its monitors were hit by heavy weapons fire in the Donetsk area, as fighting flared between Ukrainian forces and pro-Russian rebels.
The observers were unharmed but the mission described the incident as "unacceptable".
"The government in Kiev is only using the ceasefire to regroup its forces and attack us again," the "prime minister" of the self-declared Donetsk People's Republic, Alexander Zakharchenko, told reporters.
Kiev in turn accused the pro-Russian separatists of firing on Ukrainian positions around the airport, which is still in government hands after a fierce battle in May.
Stallholders in a market in the working class district of Kievsky where the shells hit were sifting through smouldering ruins of their businesses.
Irina Azarova, 52, said she blamed only one man for the devastation that has led to her financial ruin: Poroshenko.
"I was a shopkeeper, now I am a nobody. Thank you Mr President," she said as she wiped away tears with blackened hands.
Layers of mistrust
The conflict has exposed deep layers of mistrust in the largely Russian-speaking population in the east and the pro-Western leaders in Kiev, and set off the worst crisis between Moscow and the West since the Cold War.
Since the ouster of Yanukovych, Kiev has been looking westwards for political and economic security, accusing Russia of seeking to "eliminate" the country.
Following violence on the weekend, European Commission head Jose Manuel Barroso spoke by phone with Russian President Vladimir Putin and "underlined the need for a full respect" of the ceasefire plan, the EU said in a statement.
Some commentators said Poroshenko had signed up to the peace deal from a position of weakness after rebels abruptly turned around a steady string of battlefield defeats thanks to an alleged influx of Russian paratroopers and heavy weaponry.
Meanwhile, more than 1000 kilometres away from the Donetsk crucible, around 1300 troops from 15 nations, including the United States, began military exercises near the western city of Lviv.
It was the first time US troops have deployed on Ukrainian soil since the conflict erupted.
NATO and Kiev say at least 1000 Russian soldiers and possibly many more remain on Ukrainian territory in the east, with another 20,000 massed on the border. The Kremlin dismisses the evaluation as propaganda, and has expressed unease at NATO's eastward creep.
Poroshenko, whose country is not a NATO member, meets President Barack Obama in the White House on Thursday to try to obtain a "special status" relationship with the US.
Washington and Brussels last week both unveiled tougher sanctions on Moscow for its role in Ukraine that effectively lock Russian companies out of Western capital markets and hamstring its crucial oil industry.