Kyiv has confirmed that its troops have entered the key strategic town of Izyum and have begun clearing it, amid reports of a rapid advance.
Videos of troops at the entrance to the city circle on Telegram and Russia's Defence Ministry described the retreat as a "regrouping".
They said: "In order to achieve goals of the special military operation… a decision was made to regroup the Russian troops stationed in Balakliya and Izyum to step up efforts in the Donetsk direction."
"A three day operation was carried out to curtail and redeploy the Izyum-Balakliya troops to DPR… a number of distractions were carried out with the designation of the real actions of the troops."
As reports emerged on Saturday morning, Ukrainian MP Oleksiy Goncharenko said the town was liberated in half a day and that the town of Lyman had also been freed.
He said: "Ukrainian forces entered Izum, the strategic town in the Kharkiv region. Unbelievable. In spring Russians spent 1 month to take it."
Several sources say that Izyum has been liberated and military analyst Rob Lee noted two separate Russian Telegram channels 'confirmed' this was the case.
Other sources say the city has been entered by Ukrainian troops and will soon be liberated fully.
The city of Kupiansk has also been entered, as confirmed by an adviser to the head of the regional council Nataliya Popova.
Further reports suggest that Lyman is also under attack or has been captured by Ukrainian forces.
The Economist's Foreign Correspondent said there were "conflicting reports", but that "part of the picture of this counteroffensive is its speed".
The Kyiv Independent's defence reporter Illia Ponomarenko said: "The Russian front line section between Kupyansk and northern Donbas is collapsing."
He added: "An official tells me he can’t keep up. They have gone further and faster than they imagined."
Izyum is a key strategic town in the region, previously used by Russian forces as a launch pad for operations for attacks south towards Donetsk.
Earlier on Saturday, the Ministry of Defence (MoD) said in its most recent intelligence assessment that Ukrainian forces had advanced over 30 miles into previously held Russian territory and that Izium was "increasingly isolated".
They said: "Russian forces were likely taken by surprise. The sector was only lightly held and Ukrainian units have captured or surrounded several towns.
"A Russian force around Izium is likely increasingly isolated. Ukrainian units are now threatening the town of Kupiansk; its capture would be a significant blow to Russia because it sits on supply routes to the Donbas front line.
"With Ukrainian operations also continuing in Kherson, the Russian defensive front is under pressure on both its northern and southern flanks."
Ukraine's President Volodymyr Zelensky said on Friday that forces had liberated over 30 settlements in a counteroffensive against Russian invaders.
He said: "Measures to check and secure the territory in some villages of the region are ongoing, we are gradually taking control of new settlements - we are returning the Ukrainian flag and protection for all our people everywhere."
