By Laurence Norman 

BRUSSELS--European Union leaders were set to request new options for stepping up sanctions on Russia on Saturday, although some countries remained hesitant about further straining relations with the Kremlin over the Ukraine conflict.

With pro-Moscow rebels making fresh gains on the ground, a host of EU leaders, including French President François Hollande, U.K. Prime Minister David Cameron and European Commission President José Manuel Barroso said the deteriorating situation in eastern Ukraine necessitated an EU reaction.

"I expect the leaders of the European Union member states...to be ready for a new round of sanctions following the recent escalation and further destabilization of Ukraine. That's what they have said and that's what I expect them to do," Mr. Barroso said after a meeting with Ukrainian President Petro Poroshenko.

Mr. Hollande said that probable incursions by Russian troops inside Ukraine will "no doubt" lead the EU to slap a new round of sanctions on Moscow. Mr. Cameron said Russia must face "consequences" if it doesn't pull troops out of Ukraine.

Russia denies sending any troops into Ukraine. It has demanded the release of a group of Russian soldiers captured in Ukraine who Moscow said accidentally crossed the border.

EU leaders were meeting in Brussels on Saturday to agree their picks for two top EU jobs and to discuss the crisis in Ukraine and other foreign policy issues. Mr. Poroshenko was due to join the summit.

Shortly before the meeting started, an updated draft statement said the bloc "stands ready to take further steps, in light of the evolution of the situation on the ground."

"It requests the commission to urgently undertake preparatory work, jointly with the" EU's foreign-service unit.

It wasn't clear how quickly EU governments would be able to decide on fresh measures or whether they would give Russia some time to draw back its support.

Still, some leaders remained cautious about rushing into new measures against Russia. There have already been warnings from the leaders of Hungary and Slovakia that the sanctions agreed so far were ineffective and could hurt EU economies as much as Russia.

Earlier this month, Russia banned many agricultural imports from the EU in retaliation against the EU's latest restrictions.

Austrian Chancellor Werner Faymann said the bloc should be "speaking less" about sanctions.

"The effect of sanctions as they have been applied so far hasn't always produced what some expected," he said.

In July, the EU for the first time agreed broad measures against Russia's economy, the sharpest steps since Moscow annexed Crimea in March.

The measures included a ban on purchasing newly issued bonds and shares in five Russian majority state-owned banks. The EU agreed on an arms embargo and a ban on the sale of dual-use goods to military end-users in Russia, although leaders agreed current contracts could be fulfilled.

The bloc also agreed to stop exports of high-end technology to be used in deep-water oil exploration and production.

Mr. Barroso said the allegations that hundreds of Russian troops have crossed into Ukraine was a "grave transgression" and escalation of the crisis.

He said the bloc would consider additional financial assistance for Ukraine, on top of the EUR1 billion ($1.31 billion) Ukraine could receive from the bloc under already earmarked plans.

"This is the most serious crisis since the end of the Cold War," Mr. Hollande said in a short televised address before leaving Paris for Saturday's meeting. "Up against these worsening tensions, decisions must be made."

Mr. Hollande said he had spoken with Russian President Vladimir Putin on Friday to express his hope for a negotiated solution to the conflict in eastern Ukraine.

At the news conference, Mr. Poroshenko again requested limited military assistance from the bloc. Lithuanian President Dalia Grybauskaite supported that call and one EU diplomat said several governments wanted leaders to agree to allow individual member states to provide military material if they so wished.

"We are in a very serious, I would say dramatic situation," Mr. Barroso said. "We may see a situation where we reach the point of no return," he said. I believe it's still not too late to find a political solution."

In Kiev, officials Saturday accused Russia of sending more troops and equipment across the border and destroying a small village near Luhansk. That claim couldn't immediately be verified.

"Direct military aggression by the Russian Federation in the east of Ukraine is continuing. The Russians are continuing to send military equipment and 'mercenaries,'" Ukraine's National Security and Defense Council said in a Twitter post. Russia has denied sending troops and equipment, though rebels have contradicted that, saying this week that the troops came during vacation.

Rebels continued their advance against Ukrainian forces in the region Saturday, pushing back around Luhansk, a rebel stronghold that Kiev's forces had come close to encircling earlier this month, officials said.

There were reports Ukrainian units surrounded near Donetsk sustained heavy casualties in an effort to break free, but the Defense Ministry said information on that area would be released only later for security reasons.

Greg White in Moscow, Sam Schechner in Paris, Frances Robinson in Brussels contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com