The self-styled mayor of rebel-held Slavyansk, which has become the epicentre of the crisis, led eight European members of an OSCE military inspection mission before scores of local and foreign journalists in the town hall.
With four armed rebels watching over him, a spokesman for the group, German officer Axel Schneider, said the team was in good health and stressed they were "OSCE officers with diplomatic status".
"I cannot go home of my own free will," he told reporters. One of the OSCE men, a Swede, was later released as he suffers from diabetes, a rebel spokeswoman told AFP. The Vienna headquarters of the Organisation for Security and Cooperation in Europe confirmed the release and said "the efforts in the OSCE towards the release of all the other detained military inspectors and accompanying persons are going to be continued".
The local rebel leader, Vyacheslav Ponomaryov, earlier told reporters: "In our town, where a war situation is going on, any military personnel who don't have our permission are considered prisoners of war."
Pro-Russia militias this month occupied a string of towns and cities in eastern Ukraine, sparking a military response from the Ukrainian army, which is laying siege to Slavyansk. The detention of the OSCE men sparked global outrage amid the worst East-West crisis since the end of the Cold War.
AFP reporters in Slavyansk said tensions were running high at checkpoints, while militants were reinforcing their positions in the town and ordering journalists away. The international community is on edge, with one Western diplomat raising the possibility of an invasion in the coming days by Russia, which has some 40,000 troops massed on the border.
Speaking in Asia, Obama called for global unity as Europe and the United States prepare fresh sanctions against Moscow expected to come into force as early as tomorrow.
Obama said Russia had "not lifted a finger" to implement a deal struck in Geneva on April 17 aimed at easing the crisis. Continued Russian "provocation" would meet with "consequences, and those consequences will continue to grow", he told reporters in Kuala Lumpur.