At least three civilians have been killed and another 10 wounded in shelling of the main rebel stronghold in eastern Ukraine besieged by government forces.

Local residents said a rebel rocket launcher recently seen in the area may have been the target.

Donetsk council said four apartment buildings in the southern part of the city were damaged by artillery barrages. Shocked residents gathered around this morning, and some left flowers on the pavement to commemorate the victims.

Resident Marina Barsuk, 53, said the shelling came a few days after rebels had positioned a Grad multiple rocket launcher near the building and fired at Ukrainian positions. She and other residents believed the shelling came from the Ukrainian side in retribution.

Such exchanges of artillery and rocket barrage have raised the death toll among civilians as the Ukrainian forces have closed in on the main rebel bastion.

In an ominous signal that fighting will likely escalate further, top rebel leader Alexander Zakharchenko boasted yesterday about seizing 18 Grad systems from the Ukrainian military.

Government forces and the rebels use the same Soviet-made Grad (Hail) launchers, which fire unguided rockets at a distance of up to 12 miles. Their accuracy is very poor, making collateral damage from shelling populated areas inevitable.

Ukrainian officials have adamantly denied that government forces were shelling populated areas, but witness testimony has pointed to the contrary.

Explosions were also heard elsewhere in Donetsk overnight, but there was no immediate word about casualties there.