The decision does not immediately affect the gas flow to Europe but could disrupt the long-term energy supply to the region if the issue is not resolved, said analysts.
Ukraine's Naftogaz company head Andriy Kobolev said Russia had cut the supply of gas but Ukraine can manage without Russian gas until December.
Gazprom said since Ukraine had paid nothing for the gas by yesterday, from now on the company would demand Ukraine pay in advance for any future deliveries.
Ukraine was ready to accept a compromise in talks in Kiev of paying £589 million now and more later but Russia did not accept the offer.
The gas conflict is part of a wider dispute over whether Ukraine aligns itself with Russia or with the EU and comes amid the severe crisis in relations between the two countries that has followed Russia's annexation of Crimea in March. Ukraine accuses Russia of supporting a separatist insurgency in its eastern regions, which Russia denies.
Ukrainian Prime Minister Arseny Yatseniuk accused Russia of deliberately blocking a gas deal to cause Kiev supply problems next winter.