Anton Gerashenko, an adviser to Ukraine's interior minister, said on his Facebook page the plane was flying at an altitude of 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 72,000 feet.
The fate of the passengers wasn't immediately known.
Shortly after 2 p.m. East Coast time, President Barack Obama said the "world is watching" reports of the downed aircraft.
"It looks like it might be a terrible tragedy," he said, adding that his team is trying to determine whether any Americans were onboard. "That is our first priority," the president said, also saying, "The United States will offer any assistance we can to help determine what happened, and why."
Ukrainian President Petro Poroshenko had said earlier 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.
In March, a Malaysia Airlines plane carrying 239 people disappeared and has still not been found. Malaysian officials believe that flight ended in the Indian Ocean.
Malaysian Defense Minister Hishamuddin Hussein said on Twitter there's no confirmation that Thursday's plane was shot down. He said he has instructed the country's military to check and get confirmation.
The Donetsk region government said Thursday's plane crashed near a village called Grabovo, which it said is currently under the control of armed pro-Russian separatists. The region where the flight was lost has seen severe fighting between Ukrainian forces and pro-Russia separatist rebels in recent days.
The Malaysia Airlines plane is a Boeing 777-200ER, which was delivered to Malaysia Airlines on July 30, 1997, according to Flightglobal's Ascend Online Fleets, which sells and tracks information about aircraft. It has more than 43,000 hours of flight time and 6,950 takeoffs and landings.
If the plane was shot down, it would be the fourth commercial airliner to face such a fate. The previous three were:
April 20, 1978: Korean Airlines Flight 902, which diverted from its planned course on a flight from Paris to Seoul and strayed over the Soviet Union. After being fired upon by an interceptor aircraft, the crew made a forced landing at night on the surface of a frozen lake. Two of the 97 passengers were killed by the hostile fire.
Sept. 1, 1983: Korean Air Lines Flight 007 shot down by at least one Soviet air-to-air missile after the 747 had strayed into Soviet airspace. All 240 passengers and 29 crew were killed.
July 3, 1988: Iran Air Flight 655 Aircraft was shot down by a surface to air missile from the American naval vessel U.S.S. Vincennes. All 16 crew and 274 passengers were killed.
Malaysia Airlines has lost contact of MH17 from Amsterdam. The last known position was over Ukrainian airspace. More details to follow.— Malaysia Airlines (@MAS) July 17, 2014