Anton Gerashenko, an adviser to Ukraine's Interior Minister, said on his Facebook page the plane was flying at an altitude of 10,000 meters (33,000 feet). He also said it was hit by a missile fired from a Buk launcher, which can fire missiles up to an altitude of 22,000 meters (72,000 feet).
The Boeing 777 aircraft was expected in the Malaysian capital at around 6am on Friday. Malaysian Prime Minister Najib Razak said on his Twitter feed he was "shocked by reports that an MH plane crashed."
"We are launching an immediate investigation."
The Kremlin said President Vladimir Putin and US President Barack Obama had discussed the shocking new development in crisis-torn Ukraine where fighting between pro-Russian separatists and the Western-backed government has claimed over 600 lives.
Regional officials said the number of dead was "not yet known" but Russian news agency Itar-Tass cited an unnamed source at Ukraine's aviation authority as saying there were no survivors. Eyewitnesses quoted by Russian news agency RIA Novosti spoke of dozens of bodies at the crash site.
Interfax quoted the deputy prime minister of the self-declared Donetsk People's Republic, Andrei Purgin, as saying a group of rebels had arrived at scene and found "many dead".
Ukrainian President Petro Poroshenko said his country's armed forces didn't shoot at any airborne targets.
"We do not exclude that this plane was shot down, and we stress that the Armed Forces of Ukraine did not take action against any airborne targets," he said. "We are sure that those who are guilty in this tragedy will be held responsible."
Malaysia Airlines said on its Twitter feed that it "has lost contact of MH17 from Amsterdam. The last known position was over Ukrainian airspace."
The plane's destination was Kuala Lumpur.
It was the second time that a Malaysia Airlines plane was lost in less than six months. Malaysia Airlines Flight 370 disappeared in March while en route from Kuala Lumpur to Beijing. It has not been found, but the search has been concentrated in the Indian Ocean far west of Australia. - AP, AFP