Mikhail Tolstykh, better known by his nom de guerre Givi, was killed in an apparent bombing at his office, local officials and media reported on Wednesday.
The 35-year-old headed the "Somali" battalion and was a top commander in the self-declared Donetsk People's Republic. He was a notorious and high-profile commander who took part in several key battles in the nearly 33-month conflict.
The rebels' Donetsk News Agency said Tolstykh was assassinated in what it described as a terrorist attack. It said a rocket from a portable launcher struck the commander's office early on Wednesday morning.
Few additional details were released, but separatists blamed the government in Kyiv.
Yuri Tandit, an adviser to the chairman of the Ukrainian Security Service in Kyiv, told 112 television channel that his agency was looking into the reports of the death.
Several rebel commanders considered rivals to Moscow-backed separatist political leaders have been killed in bomb blasts away from the front lines. In October, a powerful Donetsk military chief, Arseny Pavlov, also known as "Motorola," was killed in a bombing.
Moscow has reportedly tried to control unruly warlords who have gained too much local power and engaged in murder and other suspected crimes against civilians. The Ukrainian government has often cited such commanders it labels as terrorists as a reason to not negotiate.
At the same time, the political leadership of the Donetsk and Luhansk regions has come to be dominated by bureaucrats tied to former pro-Russian President Viktor Yanukovych, who are rivals of some of the rebel commanders on the ground.
Some rebel commanders are considered more hardcore and less willing to negotiate with Kyiv than the pro-Russian political leadership in Donetsk and Luhansk.
Dmitry Peskov, spokesman for Russian President Vladimir Putin, said Wednesday that Tolstykh's death was an attempt to destabilized eastern Ukraine after a recent uptick in violence between government forces and rebels that claimed more than 30 lives.
He said it was impossible to suggest Russia had any role in the bombing.
Some 10,000 people have been killed and hundreds of thousands have been displaced since protesters ousted Yanukovych in early 2014, leading to Russia annexing Crimea and to the separatist rebellion in the mostly ethnic Russian eastern Ukraine.
cw/msh (AFP, AP)