A Ukrainian interior ministry official confirmed to the Interfax-Ukraine news agency.
The aircraft, which other sources said was a Boeing 777 flying from Amsterdam to Kuala Lumpur, came down near the city of Donetsk, stronghold of pro-Russian rebels, Anton Gerashchenko said, adding that it was hit by a ground-to-air missile.
There was no further confirmation of the report, although Ukrainian officials said local residents had found wreckage.
Malaysia Airlines said on its Twitter feed it had lost contact with its flight MH-17 from Amsterdam.
"The last known position was over Ukrainian airspace," it said. Gerashchenko was quoted as saying: "A civilian airliner travelling from Amsterdam to Kuala Lumpur has just been shot down by a Buk anti-aircraft system ... 280 passengers and 15 crew have been killed."
Interfax-Ukraine quoted another Ukrainian official as saying the plane disappeared from radar when it was flying at 10,000 metres (33,000 feet), a typical cruising altitude for airliners.
It came down at Torez, near Shakhtersk, some 40 km (25 miles) from the Russia border. The area has been the scene of fighting between Ukrainian troops and pro-Russian rebels.
Ukraine has accused Russia of taking an active role in the four-month-old conflict in recent days and accused it earlier on Thursday of shooting down a Ukrainian fighter jet – an accusation that Moscow denied.
The Ukrainian Prime Minister Areseny Yatseniuk has since ordered an investigation into the "airplane catastrophe" in eastern Ukraine, his spokeswoman Olga Lappo said on Thursday.
MALAYSIAN PM SAYS SHOCKED BY REPORT MALAYSIAN PLANE HAS GONE DOWN
Malaysian Prime Minister Najib Razak said on Friday he was shocked by reports a Malaysia Airlines plane had gone down over Ukraine and he was launching an investigation.
"I am shocked by reports that an MH plane crashed. We are launching an immediate investigation," Najib said on his Twitter feed. MH is the code for Malaysia Airlines.
The incident comes after a Malaysia Airlines plane went missing on March 8 on a flight from Kuala Lumpur to Beijing with 239 passengers and crew on board. It has not been found.
Najib was on his way to the operations centre at Kuala Lumpur International Airport, an official in his office said.
Malaysia Airlines said in a statement it had received notification from Ukrainian air traffic control that it had lost contact with flight MH17 at 1415 GMT, 30 km (18 miles) from the Tamak waypoint, approximately 50 km (31 miles) from the Russia-Ukraine border.
The Boeing 777 had left Amsterdam at 12.15 p.m. (Amsterdam time) and was expected to arrive in Kuala Lumpur at 6.10 a.m. (2210 GMT) on Friday, the airline said.
The airline said there were 280 passengers and 15 crew on board.