"What we see from Russia is an illegal and illegitimate effort to destabilize a sovereign state and create a contrived crisis with paid operatives across an international boundary engaged in this initiative," Xinhua quoted Kerry telling the Senate Foreign Relations Committee.
Pro-Russia activists seized several government buildings in eastern Ukraine on Sunday, demanding closer ties with Moscow and a referendum to give more powers to local authorities.
The Ukrainian parliament approved a bill against separatism on Tuesday in a bid to end violent pro-Russian rallies in the country 's east regions.
"Russia's clear and unmistakable involvement in destabilising and engaging in separatist activities in the east of Ukraine is more than deeply disturbing," Kerry said.
Russia's involvement is more that deeply disturbing: Kerry
"No one is fooled by what could potentially be a contrived pretext for military intervention, just as we saw in Crimea," the top US diplomat said.
Russia has rejected the accusation that it is involved in fomenting chaos in eastern Ukraine.
While reiterating that the US and its allies prefer a diplomatic solution to the crisis, Kerry expressed their willingness to put in effect tough new sanctions on the Russian economy, including on key sectors such as energy, banking and mining.
"It doesn't have to be this way. But it will be this way if Russia continues down this provocative path," he said.