Apartment blocks were hit as the bombardment continued through the night in Marinka, west of the city.
The pro-Russian separatist rebel leadership and the government blamed each other for the attack.
On Friday, a rebel attack on a column of armour in Luhansk region killed at least 19 soldiers - one of the worst single losses suffered by the army.
President Petro Poroshenko vowed to retaliate, saying: "For every soldier's life, the militants will pay with tens and hundreds of their own."
The rebels, who declared independence in Donetsk and Luhansk in April, retreated towards the city of Donetsk last week after a government siege of their symbolic stronghold, Slavyansk.
More than 1,000 civilians and combatants are believed to have died in the fighting since April.
The EU slapped travel bans and asset freezes on 11 rebel figures in eastern Ukraine on Saturday.
The list includes the self-declared rebel prime ministers of the Donetsk and Luhansk "people's republics", Alexander Borodai and Marat Bashirov.
Ukraine's multiple rocket launchers "Smerch" ("The Hurricane") resting positioned in sunflower fields few km from Donetsk, July 12 2014.
Rocket attacks'
Local residents, some of whom were fleeing in panic, told the Associated Press news agency rocket strikes had come in every half-hour roughly between 23:00 local time on Friday (20:00 GMT) and 04:00 on Saturday.
Rebel commander Igor Strelkov said in a video statement (in Russian) on Saturday July 12 2014., that the government had attacked Marinka with "Grad" and "Uragan "(Smerch/Hurricane) multiple rocket systems.
At least 30 people were killed as rockets fell on residential areas as well as factories, he said.
However, emergency services reported only four deaths.
Journalists based in Donetsk also said that it appeared the attack had come from Ukrainian forces, Reuters news agency reports.
Fields around Marinka (in western outskirts of Donetsk) are full of Ukrainian MLRS (multiple rocket launchers), especially Smerch and Grad type systems, July 12 2014.
Quoting eyewitnesses, he said the damage there was "enormous" and people were still trapped under rubble.
He also accused the rebels of preventing rescue workers from reaching the scene.
The official mayor of Donetsk, Oleksandr Lukyanchenko, said on his website that public transport had stopped running to the Marinka area.
Government forces in Luhansk reported new fighting on Saturday in the area where the soldiers were killed early the previous day, apparently while their column was at a halt.
Unofficial reports suggest the death toll from Friday's attack, in which the rebels are said to have used Grad rockets, was much higher.
An unnamed officer who survived the attack told his wife by phone that more than 50 soldiers had been killed, Ukraine's Unian news agency reported on Friday.
On 13 June, rebels in Luhansk shot down a military transport plane, killing all 49 military personnel aboard - the army's worst single loss to date.
The New York times: !3. July 2014
Civilians Pay A Price For Gains Of Ukraine Forces
MARINKA, Ukraine -- War came to this small farm town Friday night in the form of rockets that crashed into an apartment building near a rebel base, killing a man while he was watching television in his living room.
It was the first such attack in Marinka, southeast of Donetsk, the rebel stronghold in eastern Ukraine’s pro-Russian insurgency, and appeared to be part of a broader advance by Ukrainian forces in the east on Saturday.
The military hit rebel positions in Horlivka, a crucial town to the north, and in Karlovka, a town with a strategic bridge.
But while the Ukrainian forces might have scored tactical victories, they were not winning any friends in Marinka, where the assumption was they were to blame.
The attack there left five civilians dead and four wounded, according to the regional government, a grim sign of the imprecision and blunt force of the weapons being used by both sides in this war, which began in the spring when pro-Russian rebels seized Ukraine’s southeastern edge and declared independence.
“Pigs,” said a man with gray hair who was wiping away tears.
“People were sleeping in their beds.”
The source of the rocket attack was in dispute.
A Ukrainian military officer, who asked that his name not be used because he was not authorized to speak to the news media, said the Ukrainians did not have artillery positions close enough to hit Marinka.
“Our artillery just wouldn’t have reached there,” the officer said.
“It’s as simple as that.”
A military spokesman, Vladislav Seleznyov, said that Ukraine did not use its airpower or heavy artillery against rebel targets that were close to civilians.
But the proximity of civilians did not stop the Ukrainians from shelling in and around Slavyansk, the former rebel stronghold they took back this month.
And rebels in Marinka showed a reporter exploded rocket casings and a gaping hole in the animal feed factory where they were based, as evidence that the rockets had come from the Ukrainian military.
Two rebels had been injured, they said.
Across the street from the factory was the apartment building that took the worst hit, No. 6 Zavodskaya Street, a gray brick building rimmed with pretty gardens of brown-eyed susans and marigolds.
A hole opened into a living room, which had collapsed in on itself.
A door ripped from its hinges lay atop a large pile of curtains, cabinets and bricks.
Igor Nersisyan, a retiree who lives on the second floor, said he had helped a neighbor dig her husband out from under that rubble early Saturday morning.
The man, whom Mr. Nersisyan identified as Victor Belotserkovny, was dead when they reached him, the top of his skull sheared off in the blast.
“They are trying to destroy peaceful people,” said Mr. Nersisyan, who blamed the Ukrainian military, as residents with bags of belongings walked away from the building.
Olga Gavrilovna, a first-floor resident, was putting thawing frozen chicken into a thin blue plastic bag in her tiny kitchen; the floor was covered with the contents of its cupboards and the windows were blown out.
She crunched over the glass, throwing leftover soup into the toilet, barely stopping to survey the damage.
“I just can’t think right now,” she said, with a blank look.
“What is there to say?”
There were unconfirmed reports on Saturday that Ukrainian warplanes struck targets near Dzerzhinsk, a town north of here, killing hundreds of rebels.
Both sides have made unsubstantiated claims about casualties in the past.
Also on Saturday, another rocket attack killed at least four people on the southern edge of Donetsk.
Local residents said the attack took place around 4 p.m.
By evening, businesses and homes were still in flames, and bodies lay outside a building that had been hit.
It is possible that the rebels were receiving reinforcements.
The state news agency of Ukraine, Ukrinform, reported Saturday that militants had crossed from Russia into Ukraine in the Krasnodon district, near the village of Veliki Sukhodil in a large convoy of armored vehicles, including tanks.
That claim has not been verified.
In Donetsk, leaders of the rebel movement gave their version of the events in Marinka.
Igor Strelkov, the Russian citizen who is the military commander of the rebel forces here, said the Ukrainian armed forces had struck a milk factory as well as the animal feed factory; he claimed that more than 30 people had been killed, despite the lower figure provided by a local official.
“This is a relatively standard picture for the Ukrainian military,” said Alexander Borodai, another Russian citizen, who along with Strelkov leads the insurgency here.
Despite all of that, the rebels seemed to be in a light mood.
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