Ukrainian troops have retaken the strategically-important city of Lysychansk in eastern Ukraine, as they press on with their offensive to stamp out a pro-Russian rebellion, President Petro Poroshenko said.

"Ukrainian forces have raised the flag over the town council in Lysychansk," the presidency said in a statement late Thursday.

Operations were continuing to drive the remaining insurgents out of the town, the statement said.

Lysychansk -- a city of around 105,000 some 90 kilometres northwest of the rebel stronghold of Lugansk -- was seized by separatists in early April at the start of a bloody insurgency that has now claimed the lives of some 1,000 people, including the nearly 300 on board downed Malaysia Airlines flight MH17.

The government offensive against the rebels has made significant progress since rebels unexpectedly fled a string of key towns earlier this month.

Government forces say they are now closing in on the major cities of Lugansk and Donetsk, where the bulk of the insurgent fighters have dug in and pledged to fight to the death.