By Laurence Norman 

BRUSSELS--European Union leaders were set on Saturday to request new options for stepping up sanctions on Russia, although some countries remained hesitant about further straining relations with the Kremlin over the Ukraine conflict.

With pro-Moscow rebels making fresh gains on the ground, a host of EU leaders, including French President François Hollande, U.K. Prime Minister David Cameron and European Commission President José Manuel Barroso said the deteriorating situation in eastern Ukraine necessitated an EU reaction.

Until 72 hours ago, EU leaders weren't expected to take any fresh action against Russia this weekend following Brussels-brokered talks in Minsk on Tuesday between Russian President Vladimir Putin and Ukraine's President Petro Poroshenko.

Yet the mood soured significantly as reports emerged--later backed up by Washington--that hundreds of Russian soldiers had entered Ukraine.

"I expect the leaders of the European Union member states...to be ready for a new round of sanctions following the recent escalation and further destabilization of Ukraine," Mr. Barroso said after a meeting with Mr. Poroshenko.

Mr. Hollande said the troop incursion will "no doubt" lead to a new round of sanctions on Moscow. Mr. Cameron said Russia must face "consequences" if it doesn't pull troops out of Ukraine.

Russia denies sending any troops into Ukraine and says a group of soldiers arrested by Ukrainian authorities had entered the country by accident.

President Barack Obama has ruled out a U.S. military response but said Thursday that Russia's escalating incursion into Ukraine would bring more costs for Moscow. He said further actions would be discussed at a NATO summit next week.

EU leaders were meeting in Brussels on Saturday to agree on their picks for two top EU jobs and to discuss the crisis in Ukraine and other foreign-policy issues.

Saturday evening, the leaders picked Italian Foreign Minister Federica Mogherini to be the bloc's new foreign-policy chief. Soon after, she said continued dialogue with Moscow was important but acknowledged that, so far, it hadn't yielded results.

The bloc also picked Polish Prime Minister Donald Tusk as the new president of the European Council, the body which represents member states. He said the bloc would be |defeated only when it is divided on the Ukraine crisis.

Meanwhile, Mr. Poroshenko said his government was working on a fresh peace plan that he hopes to publish in draft form next week.

While he gave no details, Mr. Poroshenko said he hopes the plan can form the basis of discussions Monday on a cease-fire between Russia and Ukraine. He said he still would like to see a political solution to the escalating crisis.

Russia has repeatedly called on Kiev to end its offensive against the rebels. Ukraine and its western allies say Moscow must offer guarantees to stem flows of fighters and weapons across its border for a sustainable cease-fire to work.

Shortly before Saturday's EU summit started, an updated draft statement from the leaders said the bloc "stands ready to take further steps" on sanctions, "in light of the evolution of the situation on the ground."

The statement requested EU officials "to urgently undertake preparatory work" on new measures.

EU diplomats said later some leaders were pushing for the EU to set out a clear timeline for a decision.

Still, some leaders remain cautious about rushing into new measures against Russia. Earlier this month, Russia banned many agricultural imports from the EU in retaliation against the EU's latest restrictions.

Austrian Chancellor Werner Faymann said the bloc should be "speaking less" about sanctions.

"The effect of sanctions as they have been applied so far hasn't always produced what some expected," he said.

In July, the EU for the first time agreed broad sanctions against Russia's financial, energy and defense sectors, the sharpest steps since Moscow annexed Crimea in March.

Still, there were plenty of exemptions to the restrictions. Member states were allowed to complete already signed defense contracts. The financial measures allowed most transactions to continue and only placed significant restrictions on five state-owned Russian banks.

The U.S. followed the EU's moves in July by adopting similar sanctions against Russian banks as well as the energy, arms and shipping sectors.

Mr. Barroso said the EU would consider additional financial assistance for Ukraine, on top of the EUR1 billion ($1.31 billion) Ukraine could receive from the bloc under already earmarked plans.

Mr. Poroshenko again pushed for military assistance from the EU. He also said Ukraine will ratify next month a broad political and trade deal with the bloc that Moscow opposes.

Greg White in Moscow, Sam Schechner in Paris and Frances Robinson in Brussels contributed to this article.

Write to Laurence Norman at laurence.norman@wsj.com