Vladimir Putin and Ukrainian president Petro Poroshenko shook hands ahead of talks in Belarus, hours after Kiev announced it had captured soldiers from a Russian paratrooper division.
The Russian president and his counterpart met face-to-face for the first time since June in the Belarusian capital of Minsk to discuss the ongoing conflict in eastern Ukraine.
"The fate of peace and the fate of Europe are being decided in Minsk today," Poroshenko said at the talks joined by the presidents of Belarus and Kazakhstan and three senior EU officials including foreign policy chief Catherine Ashton.
Poroshenko said he came to Minsk in search of a political compromise to end the separatist rebellion in eastern Ukraine but warned that there was no way out of the crisis if effective border controls with Russia were not put in place to stop arms supplies to the insurgents.
On the other hand, Putin said that the conflict "could not be solved by further escalation of the military scenario without taking into account the vital interests of the southeast of the country and without a peaceful dialogue of its representatives."
Ukraine and the West have long accused the Kremlin of actively supporting rebels with manpower and military equipment.
The Russian leader also spoke about trade relations between the two countries, warning that Moscow would retaliate if Kiev ratifies a trade pact with the EU signed earlier this year.
The meeting came as Ukraine said soldiers from a Russian paratrooper division had been captured
near Dzerkalne village, 50km (30 miles) southeast of Donetsk, the Ukrainian city held by pro-Russian separatists.
Russia has claimed that the paratroopers had crossed the border "by accident".