Vladimir Putin has summoned his security council and the Russian Navy has announced war games in the Black Sea, a day after the Russian president accused Ukraine of trying to provoke a conflict over Crimea, which Moscow seized and annexed in 2014.
The move has heightened worries in Ukraine that Russia may plan to ramp up fighting in a war between Kiev and pro-Russian separatists.
The conflict had been de-escalated over the last two years by a shaky peace process.
Using some of his most aggressive rhetoric against Kiev since the height of the war two years ago, Putin has pledged to take counter-measures against Ukraine, which he accused of sending saboteurs into Crimea to carry out terrorist acts.
Ukraine has called the accusations false and says they look like a pretext for Russia to escalate hostilities.
Such an escalation could be used by Putin to demand better terms in the Ukraine peace process, or to inflame nationalist passions at home ahead of Russian parliamentary elections next month.
The Russian leader met his top military and intelligence service brass on Thursday and reviewed "scenarios for counter-terrorism security measures along the land border, offshore and in Crimean air space," the Kremlin said.
Ukrainian President Petro Poroshenko said he had ordered all Ukrainian units near Crimea and in eastern Ukraine onto the highest state of combat readiness.
He was seeking to urgently speak to Putin, the leaders of France and Germany, US Vice President Joe Biden and European Council President Donald Tusk.
In Washington, State Department spokeswoman Elizabeth Trudeau said the United States was extremely concerned and called on both sides to reduce tension and rhetoric.
In New York, the UN Security Council held a closed-door meeting at Ukraine's request to discuss the growing tensions.
Ukrainian UN Ambassador Volodymyr Yelchenko warned that Russia had amassed more than 40,000 troops in the region and said the build-up could reflect "very bad intentions".
Oleh Slobodyan, a spokesman for the Ukrainian border guards, said he had observed an uptick in Russian military activity in northern Crimea in recent days after heavier fighting in eastern Ukraine.
"These troops are coming with more modern equipment and there are air assault units," he told a news briefing in Kiev.
The Russian Defence Ministry said its navy - whose Black Sea Fleet is based in Crimea - would start to hold exercises in the area to practice repelling underwater attacks by saboteurs.
There were reports on Thursday evening that the authorities had cut off Internet access in northern Crimea close to Ukraine.
Russia says it caught infiltrators after at least two armed clashes on the border between Crimea and Ukraine over the weekend, and one of its soldiers and an FSB security service employee were killed.
Kiev denies the events ever happened.
Whatever the truth, the allegations have already scuppered planned talks about eastern Ukraine slated for the sidelines of a G20 summit in China next month. Putin said such talks would now be "pointless".
Volodymyr Fesenko, a political analyst in Ukraine, said he thought the Kremlin had its own revised peace plan for eastern Ukraine up its sleeve.
"Putin will scare the West with the prospect of full-scale conflict with Ukraine," he said.
"He is trying to increase pressure on Kiev to force Ukraine to accept a Russian plan to resolve the conflict in the east.
"Putin won't go all out for a big war. But there might be pinpoint military operations against radicals whose bases are located near the border with Crimea."