The coordinated announcements came after Kiev and NATO said around 1,000 Russian troops remained in Ukraine after allegedly crossing the border to bolster the separatist rebellion in what has been described as an invasion by stealth.
Kiev also acknowledged that the insurgents have extended their control over territory on the eastern border to the Sea of Azov after a lightning counter-offensive last month reportedly backed by elite Russian forces.
The European Union's latest restrictions target major Russian oil, finance and defence companies and impose asset freezes and visa bans on a host of Russian figures as well as rebels in Ukraine and annexed Crimea.
However, the 28-member bloc held out the prospect that they could be lifted after a review of the truce at the end of September.
Moscow, its economy already on the brink of recession, had responded furiously to the new measures by its largest trading partner.
"By taking this measure, the EU has practically decided against the process of a peaceful settlement of the Ukrainian crisis," the foreign ministry said Thursday, urging Europe to give Ukraine "a chance for peace".
The EU move had been delayed after some member states -- wary that further Kremlin reprisals could hit their own fragile economies -- had said they wanted to wait and see what happened on the ground in Ukraine before acting.
Russia's neighbours in eastern Europe have accused energy giant Gazprom of slashing gas deliveries in what analysts say was a message directed at Brussels, although Moscow denied such a move.
'Amend, suspend or repeal'
Russia has threatened to bar EU airlines from its airspace, and said it has drawn up a list targeting imports of consumer goods and second-hand cars from the West.
European Council President Herman Van Rompuy said the EU could "amend, suspend or repeal" the sanctions depending on the results of a comprehensive review of the ceasefire at the end of the month.
The stepped up restrictions reflect deep Western suspicions over Moscow's territorial ambitions in its western neighbour after the seizure of Crimea in March in the chaotic weeks that followed the ouster of a pro-Kremlin leader in Kiev.
But last Friday's peace pact -- the first backed by both Kiev and Moscow since the insurgency erupted across Ukraine's industrial heartland in April -- has so far held, despite accusations of violations on both sides.
The conflict has killed more than 2,700 people, forced at least half a million from their homes and sent tensions between Russia and the West soaring to post-Cold War highs.
Ukrainian President Petro Poroshenko said Wednesday the situation had drastically improved since the truce, and even announced that the bulk of Russian troops had been removed, a potentially significant development in the crisis.
A NATO military officer said the withdrawal would be "a good first step" but that about 1,000 Russian troops remained in Ukraine with another 20,000 massed on the border.
