Ukraine’s National Security and Defense Council (NSDC) said on Thursday that the army has captured Novosvitlivka, which lies just southeast of Lugansk.
Sources say Lugansk has come under sustained attacks from the Kiev’s government forces for weeks, and has been cut off from water and power supplies.
The developments come as Moscow has sent about 300 trucks with tons of aid for the city. The trucks are currently parked just short of the Ukrainian border.
Russian media say some 2,000 tons of aid, from baby food to sleeping bags, was en route to eastern Ukraine, where hundreds of people have been killed in fighting between pro-Russians and government forces.
Ukraine has pledged to deny entry to the Russian convoy, saying the mission could be a ploy to help the pro-Kremlin forces. The United States and its European allies are now supporting Ukraine's plans to stop the convoy at the border.
The pro-Russia forces in Donetsk have voiced preparedness for aceasefire to avert a humanitarian disaster in the area. However, the Kiev government has rejected the call.
Kiev says it will not allow the Russian aid convoy into the country without oversight from the International Committee of the Red Cross.
Ukraine’s mainly Russian-speaking regions in the east have witnessed deadly clashes between pro-Russia protesters and the Ukrainian army since Kiev launched military operations to silence the pro-Russians.
The political unrest in eastern Ukraine has so far claimed the lives of more than 2,000 people, according to figures by the Office of the UN High Commissioner for Human Rights (OHCHR).
Nearly 300,000 people have been also forced to flee their homes due to fierce fighting in the east, according to the UN.