KIEV (AFP) - Ukraine troops and pro-Russian rebels are engaged in combat inside the flashpoint town of Debaltseve, both sides said on Tuesday, in a significant blow to a fragile, three-day-old ceasefire in Ukraine's east.

It was the first time fighting has erupted on the streets of the town, which up to now had been the scene of artillery exchanges between thousands of government troops holed up inside and heavily armed rebels encircling it.