Reports suggested about 196 bodies had been placed on three railway carriages - apparently with refrigerator capability - in a train station in the mining city of Torez, nine miles from the crash site.
In a development that will only add to the anguish of victims' families, there were conflicting reports on where the trains were going, with the driver telling reporters at the scene that he did not know his destination.
The bodies were loaded by pro-Russian rebels who control the area of eastern Ukraine where the plane is thought to have been downed by a surface-to-air missile on Thursday, causing the deaths of 298 people, including Scots-born Stephen Anderson.
The train was briefly inspected by international monitoring body the Organisation for Security and Cooperation in Europe (OSCE), but officials were accompanied by heavily armed rebels. As they opened the metal door to one of the carriages to inspect the interior, black body bags were visible inside.
The investigators were unable to confirm the number of bodies inside or the train's destination.
Alexander Hug, the deputy chief of the OSCE mission, said: "The special monitoring mission, in its third day dealing with the incident, has now monitored the location where bodies are being refrigerated in three wagons.
"We have not been able to count them, as that would be too difficult in this situation."
Michael Bociurkiw, the spokesman for the mission, added: "Going inside the wagons is impossible without special equipment. The stench is very, very bad."
Oil Worker Mr Anderson, 44, of Lossiemouth, Moray, was one of ten British people killed in the disaster. The former RAF search-and-rescue leader leaves behind wife Joanna, and daughter Jordan from a previous marriage.
A spokesman for his employer Maersk Drilling said: "Our thoughts go out to Stephen Anderson's family and his colleagues on board Maersk Deliverer, and we will make every effort possible to support and assist family and colleagues.
"Stephen and his wife Joanna were together for 15 years and the whole family spent last Christmas together. Stephen has left behind a beautiful daughter and a loving family."
A niece also wrote online: "Uncle Steve, words cannot describe how heartbroken I am - we all are. You'll never be forgotten and will continue to live in our hearts."
Other Brits killed in the crash include John Alder, 63, and Liam Sweeney, 28, from Sunderland, who were on their way to New Zealand to see Sunderland Football Club play. Lawyer John Allen, 44, his Dutch wife Sandra and sons Christopher, 16, Julian, 14, and Ian, eight, were also flying to Indonesia on holiday.
Banker Andrew Hoare, 59, also died alongside his Dutch wife Estella, 51, and their two sons Jason, 14, and Friso, 12.
The security of the crash site has been cause for concern since the plane came down on Thursday amid reports rebels were looting the wreckage, stealing the personal belongings of the dead.
They are also believed to have taken the plane's black box flight recorders, but claim they will hand them over to the International Civil Aviation Organization.
Volunteers have also been searching the fields surrounding the crash site, pinpointing belongings and remains to the emergency services.
The US state department said there had been multiple reports of bodies and aircraft parts being removed by rebels.
l Sky News has apologised after reporter Colin Brazier rifled through a victim's suitcase during a live broadcast. The broadcast was met with an outpouring of outrage on Twitter.