Syria's opposition said that rockets were fired over rebel-held Damascus suburbs in the middle of the night, releasing deadly fumes and killing men, women and children as they slept.
The government of President Bashar al-Assad denied using chemical weapons.
The Security Council, where Russia has vetoed previous Western efforts to impose UN penalties on Assad, began a closed-door meeting but is not expected to take decisive action, with the big powers still at loggerheads and cautiously seeking clarity over the incident.
Images, including some by freelance photographers supplied to Reuters, showed scores of bodies - some of them small children - laid on the floor of a clinic with no visible signs of injuries. Some showed people with foam around their mouths. Reuters was not able to verify the cause of their deaths.
The United States and others said it had no independent confirmation that chemical weapons had been used.
Opposition activists cited death tolls ranging from about 500 to, by one account, some 1300 after shells and rockets fell around 3am.
One man who said he had retrieved victims in the suburb of Erbin told Reuters: "We would go into a house and everything was in its place. Every person was in their place. They were lying where they had been. They looked like they were asleep. But they were dead."
When shelling hit her town of Mouadamiya, southwest of the capital, Farah al-Shami ignored rumours on Facebook that rockets were loaded with chemical agents. She thought her district was too close to a military encampment to be affected.
"And at the same time the UN was here. It seemed impossible. But then I started to feel dizzy. I was choking and my eyes were burning," the 23-year-old told Reuters over Skype.
"I rushed to the field clinic nearby. Luckily no-one in my family was hurt, but I saw entire families on the floor."
If confirmed, it would be the biggest chemical weapons attack since thousands of Iraqi Kurds were gassed by Saddam Hussein's forces at Halabja in 1988.
Doctors interviewed described symptoms they believe point to sarin gas, one of the agents Western powers accuse Damascus of having in an undeclared chemical weapons stockpile.
In Britain, Foreign Secretary William Hague said he hoped it would "wake up" supporters of Assad's regime to "realise its murderous and barbaric nature".
UN chemical weapons inspectors arrived in the Syrian capital only this week and Mr Hague said that they should be allowed immediate access to the site of an alleged deadly chemical weapons attack.
He added: "We hope the UN team in Damascus will be given immediate and unrestricted access to this area to try and establish the truth. There is no reason not to be given access when (the site) is not so many miles from where they are doing work now."
White House spokesman Josh Earnest said that "if the Syrian government has nothing to hide", it would facilitate the work of the UN inspectors.
Syrian Information Minister Omran Zoabi said the allegations were "illogical and fabricated". Assad's officials have said they would never use poison gas against Syrians.