The accusation came hours before President Obama said the United States "is not taking military action to solve the Ukrainian problem" but trying to mobilize international pressure on Moscow.
"Russian soldiers, tanks and air defense have supported and fight alongside separatists as they open a new front in a crisis manufactured and fueled by Russia," Samantha Power, U.S. ambassador to the United Nations, told the council.
She noted that it was not the first time Russia has been called by the council to account for its activities inside Ukraine.
"At every step, Russia has come before this council to say everything but the truth," Power said.
"It has manipulated, obfuscated and outright lied."
In response, the Russian ambassador, Vitaly Churkin, said, "Everyone knows there are Russian volunteers in eastern Ukraine. No one is hiding it."
He said the conflict was Ukraine's fault, calling it the "direct consequence of the reckless policy of Kiev, which is conducting a war against its own people."
Rather than blame Russia, he said, the United States should "restrain your geopolitical ambitions. Countries around the world would breathe a sigh of relief."
The Ukrainian envoy, Oleksandr Pavlichenko, accused Russia of intentionally undermining peace efforts.
Churkin asked if Kiev's demand for separatists to disarm was an attempt to provoke more violence.
Pavlichenko replied that Kiev is "ready to engage on a whole range of issues" and the only non-negotiable issues are Ukraine's sovereignty, territorial integrity and its "European aspirations."
At the White House, Obama ruled out a U.S. military response.
"It is not in the cards for us to see a military confrontation between Russia and the United States in this region," he said during a 30-minute news conference.
He said he did not see the moves of the past week as an invasion but "a continuation of what's been taking place for months now ... not really a shift."
"This is not a homegrown, indigenous uprising in eastern Ukraine," he said.
"The separatists are backed, trained, armed, financed by Russia. ... We've seen deep Russian involvement in everything they've done."
He echoed Ukrainian claims that Russian President Vladimir Putin has rejected attempts to resolve the conflict peacefully.
"We have not seen any meaningful action on the part of Russia to actually try to resolve this in a diplomatic fashion," Obama said.
He spoke earlier in the day with German Chancellor Angela Merkel about the Russian incursion, and both agreed the United States and European Union would have to consider expanding sanctions on Moscow, the White House said in a statement.
The U.N. Security Council convened the emergency meeting hours after Ukrainian President Petro Poroshenko, who will meet with Obama at the White House next month, declared that "Russian forces have entered Ukraine" in support of separatist rebels.
The meeting, called by Lithuania, followed charges Thursday by NATO officials of a significant increase of Russian military activity — including evidence of combat soldiers — in eastern Ukraine.
Russia has strongly denied such allegations.
"Russia has to stop lying and has to stop fueling this conflict," Power said.
"The mask is coming off. In these recent acts, we see Russia's actions for what they are — a deliberate effort to support and now fight alongside illegal separatists in another sovereign country."
Power said Russia's actions in the past 48 hours "have spoken volumes," and she called on the Security Council to take immediate action.
"How can we tell those countries that border Russia that their peace and sovereignty is guaranteed if we do not make our message heard on Ukraine?" she asked the council.
"The cost of inaction is unacceptable."
Jeffrey Feltman, U.N. undersecretary-general for political affairs, opened the Security Council meeting by saying its immediate focus "must be to find ways to reverse the dangerous escalation of fighting that has occurred over the past 24 hours and move quickly away from armed conflict and toward political solutions and dialogue."
Ukraine has charged that at least two convoys of Russian military equipment entered southeastern Ukraine this week to open up a third front in the fighting between Ukrainian armed forces and Russian-backed separatists in eastern regions.
More than 2,000 people have died in clashes in eastern Ukraine, according to a recent U.N. report.
Russian-backed rebels have declared two regions as independent republics and the cities of Donetsk and Luhansk have been largely surrounded by Ukrainian forces.
Poroshenko, who discussed the crisis with Putin two days ago, called for U.N. action in a televised statement to the nation, saying, "The world must provide assessment of sharp aggravation of the situation in Ukraine."
"Russian military boots are on Russian ground," said Ukrainian Prime Minister Arseniy Yatsenyuk., who also appealed to the United Nations for a response to a "growing military threat from Russia."
In London, British Prime Minister David Cameron said there is "mounting evidence that Russian troops have made large-scale incursions" into southeastern Ukraine.
Such actions are "completely unacceptable and illegal," he said, urging Russia to find a political solution to the crisis, or "there will be further consequences."
In Brussels, Brig. Gen. Nico Tak said at NATO headquarters Thursday that the alliance noted a "significant escalation in both the level and sophistication of Russia's military interference in Ukraine" in the past two weeks.
"Russia is reinforcing and resupplying separatist forces in a blatant attempt to change the momentum of the fighting, which is currently favoring the Ukrainian military," Tak said.
NATO produced satellite images as "additional evidence that Russian combat soldiers, equipped with sophisticated heavy weaponry, are operating inside Ukraine's sovereign territory."
Geoffrey Pyatt, U.S. ambassador to Ukraine, wrote on Twitter that Russian troops are directly intervening in Ukraine because of a flagging military effort by rebels.
"Russian-supplied tanks, armored vehicles, artillery and multiple rocket launchers have been insufficient to defeat Ukraine' armed forces," Pyatt wrote.
"So now an increasing number of Russian troops are intervening directly in fighting on Ukrainian territory. "
As charges of a Russian incursion mounted, Andrey Kelin, Russia's representative to the Organization of Security and Cooperation in Europe, which has an international monitoring group in Ukraine, denied the allegations.
"We have said that no Russian involvement has been spotted, there are no soldiers or equipment," he said, the Russian news agency ITAR-Tass reported.
"Accusations relating to convoys of armored personnel carriers have been heard during the past week and the week before that," he said.
"All of them were proven false back then and are being proven false again now."
Ukraine said this week that it had captured 10 Russian paratroopers who had crossed into Ukraine and showed video of some of the men being interviewed.
Putin suggested the soldiers crossed the unmarked border by accident while on training exercises.
After his meeting with Poroshenko in Belarus, Putin said a possible cease-fire plan did not come up.
He said a solution to the crisis in eastern Ukraine is "not our business; it is a domestic matter for Ukraine itself."
He said all Russia could do was "support the creation of an environment of trust."
A pro-Russian leader conceded that as many as 4,000 Russian citizens are fighting alongside the rebels but are doing so strictly voluntarily.
"Many former high-ranking military officers have volunteered to join us. They are fighting with us, considering that to be their duty," Alexander Zakharchenko, prime minister of the self-declared Donetsk People's Republic in Ukraine, told Russian TV, the BBC reports.
"There are also many in the current Russian military that prefer to spend their leave among us, brothers who are fighting for their freedom, rather than on a beach," Zakharchenko said.
In Mariupol, a city of 450,000, a brigade of Ukrainian forces arrived at the airport, while deep trenches were dug a day earlier on the city's edge.
In Donetsk, the largest rebel-held city, 11 people were killed by shelling during the night, the city administration said in a statement.
"These incursions indicate a Russian-directed counteroffensive is likely underway in Donetsk and Luhansk," State Department spokeswoman Jen Psaki said.
She voiced concern about overnight deliveries of materiel in southeast Ukraine near Novoazovsk and said Russia was being dishonest about its actions, even to its own people.
Russian forces, she said, are being sent 30 miles inside Ukraine, without them or their families knowing where they are going.
She cited reports of burials in Russia for those who've died in Ukraine and wounded Russian soldiers being treated in a St. Petersburg hospital.