Moscow on Saturday abandoned its main stronghold in northeastern Ukraine after a rapid collapse of one of the war's key front lines following a swift advance of Ukrainian forces.
The rapid fall of Izium in Kharkiv province was Moscow's worst defeat since the withdrawal of its troops from the capital Kyiv in March.
This could prove to be a turning point in the 6-month-old war, in which thousands of Russian soldiers abandoned their stockpiles of ammunition and equipment as they fled.
The Russian military used Izium as a logistics base for one of its main operations, a month-long attack from the north on the Donbass region adjacent to Donetsk and Luhansk.
The state-run TASS news agency quoted Russia's defense ministry as saying it had ordered troops to leave the surrounding area and strengthen operations elsewhere in neighboring Donetsk.
TASS reported that the head of Russia's administration in Kharkiv asked residents to evacuate the province and flee to Russia to save lives.
Eyewitnesses spoke of a traffic jam of cars, in which people were leaving Russian-held territory.
Ukraine's President Volodymyr Zelensky said in a video address on Saturday evening, "The Russian military is performing to the best of its ability these days to have their backs."
He said Ukraine's armed forces had liberated some 2,000 square kilometers (770 sq mi) of territory since retaliation against Russia earlier this month.
Ukrainian officials did not confirm whether they had recaptured Izium, but Zelensky's chief of staff Andrey Yermak posted a photo of soldiers on its outskirts and tweeted an emoji of grapes.
The name of the city means "raisins".
Yermak later wrote on Twitter, "The Russian army is claiming the title of the fastest army in the world..keep running!"
The announcement of the Russian withdrawal came hours after Ukrainian troops moved north to capture the city of Kupiansk, the only railway hub that supplies Russia's entire front line in northeastern Ukraine.
Ukrainian officials posted pictures of their soldiers in the early hours of Saturday, waving the country's blue-yellow flag in front of the city hall of Kupiyansk.