The separatists denied responsibility for the attack but Ukrainian military spokesmen said the bus convoy had come under fire from rebel Grad missiles and mortar launchers, causing an unknown number of casualties.
They said the attack happened in an area of fierce fighting between government forces and the separatists.
"A powerful artillery strike hit a refugee convoy near the area of Khryashchuvatye and Novosvitlivka. The force of the blow on the convoy was so strong that people were burned alive in the vehicles - they weren't able to get out," one spokesman said.
Describing the attack as a "bloody crime", another military official said: "A lot of people have been killed including women and children. The number of dead is being established."
A rebel leader denied his forces had the military capability to carry out the attack, and accused Kiev's forces of regularly attacking the area and also using Russian-made Grad missiles.
"The Ukrainians themselves have bombed the road constantly with aeroplanes and Grads," said Andrei Purgin, deputy prime minister of the self-proclaimed Donetsk People's Republic.
"It seems they've now killed more civilians like they've been doing for months now. We don't have the ability to send Grads into that territory."
Another rebel spokesman denied the convoy had been struck, challenging Kiev to produce evidence.
Kiev's forces reported new successes overnight, building on a weekend breakthrough when troops took Luhansk, a city held by pro-Russian separatists since fighting began in April.
Troops blockaded or recaptured rebel-held positions after international talks in Berlin failed to reach agreement on a ceasefire. Nine soldiers were killed.
Western sanctions against Moscow have failed to stem what Nato says is a steady supply of military equipment and men from Russia to help the rebels. Russia denies sending support, saying the rebels have seized equipment from the Ukrainians.
Russian Foreign Minister Sergei Lavrov said issues around a humanitarian convoy sent by Moscow to relieve parts of eastern Ukraine had been resolved. But he sais no progress had been made on a ceasefire or political solution to the conflict in his talks in Berlin on Sunday with the Ukrainian Foreign Minister Pavlo Klimkin and German and French foreign ministers.
Russia says it wants a ceasefire so aid can get to people trapped by the fighting. A 280-truck Russian convoy carrying humanitarian aid has been stalled at the Ukrainian border since last week, as Kiev insists on formalities so it can be distributed by the Red Cross.
Mr Klimkin said: "Russia must close the border and stop shelling. If you have mercenaries and weaponry coming through the border from the Russian federation how can you reach a ceasefire? It's not about terminology or conditions. It's about substance. If you want peace, you have to use peaceful means not the means of war."