Russian forces are locked in fierce clashes with Georgia inside its breakaway South Ossetia region, reports say, amid fears of all-out war.
Moscow sent armoured units across the border after Georgia moved against Russian-backed separatists.
Russia says 12 of its soldiers are dead, and separatists estimate that 1,400 civilians have died.
Georgia accuses Russia of waging war, and says it has suffered heavy losses in bombing raids, which Russia denies.
Georgian President Mikhail Saakashvili says he is willing to agree an immediate ceasefire
Russian tanks have reportedly reached the northern suburbs of the regional capital, Tskhinvali, and there were conflicting claims about who was in control of the city.
"Now our peacekeepers are waging a fierce battle with regular forces from the Georgian army in the southern region of Tskhinvali," a Russian military official was quoted as saying by Moscow-based news agency, Interfax.
After days of exchanging heavy fire with the separatists, Georgian forces moved on Thursday night to regain control of the region, which has had de facto independence since a war against Georgia that ended in 1992.
Georgia and its breakaway regions
I saw bodies lying on the streets, around ruined buildings, in cars. It's impossible to count them now
In pictures: Unrest in Georgia
Bitterness turns to conflict
Georgian President Mikhail Saakashvili said Russia was at war with his country.
He told the BBC: "Our troops are attacked by thousands of troops coming in from Russia."
He said Georgia had shot down several Russian planes and accused Moscow of bombing Georgian air bases and towns, resulting in the death of 30 military personnel and civilians.
Despite denials from Moscow, the Russian air force has been carrying out air raids in South Ossetia and Georgia itself, says the BBC's Richard Galpin, in Gori, eastern Georgia.
Russian President Dmitry Medvedev said he had to act to defend South Ossetia's civilians, most of whom have been given Russian citizenship.
He also voiced anger over the reported fatalities of Russian servicemen in the breakaway province.
Russian Foreign Minister Sergei Lavrov
"We will not allow their deaths to go unpunished," he said. "Those responsible will receive a deserved punishment."
Russian Foreign Minister Sergei Lavrov said Moscow had received reports that villages in South Ossetia were being ethnically cleansed.
The BBC's Matthew Collin in Tbilisi says battles continue around Tskhinvali with the sound of explosions, rocket fire and military planes flying overhead.
The regional capital, where inhabitants are said to be sheltering in basements without electricity or phone lines, is reported to be devastated.
SOUTH OSSETIA TIMELINE
1991-92 S Ossetia fights war to break away from newly independent Georgia; Russia enforces truce
2004 Mikhail Saakashvili elected Georgian president, promising to recover lost territories
2006 S Ossetians vote for independence in unofficial referendum
April 2008 Russia steps up ties with Abkhazia and South Ossetia
July 2008 Russia admits flying jets over S Ossetia; Russia and Georgia accuse each other of military build-up
7 August 2008 After escalating Georgian-Ossetian clashes, sides agree to ceasefire
8 August 2008 Heavy fighting erupts overnight, Georgian forces close on Tskhinvali
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Q&A: Violence in South Ossetia
In quotes: Strife in Georgia
Fleeing resident Lyudmila Ostayeva, 50, told AP news agency: "I saw bodies lying on the streets, around ruined buildings, in cars. It's impossible to count them now. There is hardly a single building left undamaged."
International Red Cross spokeswoman Anna Nelson said it had received reports that hospitals in Tskhinvali were "overflowing" with casualties.
In other developments:
* The UN Security Council was holding its second emergency meeting on Friday in a bid to end the crisis, after failing to agree earlier on the wording of a Russian-drafted statement
* US Secretary of State Condoleezza Rice called on Russia to pull its troops out of Georgia and respect its territorial integrity
* Georgia's president said his country was withdrawing half its contingent of 2,000 troops from Iraq to help deal with the crisis
* Russia said it would cut all air links with Georgia from midnight on Friday
* The European security organisation, the OSCE, warned that the fighting in South Ossetia could escalate into a full-scale war
* The US and the EU were reported to be sending a joint delegation to the region to seek a ceasefire and Nato said it was seriously concerned