Anton Gerashenko, an adviser to Ukraine's interior minister, said on his Facebook page that the plane was flying at an altitude of 33,000 feet when it was hit by a missile fired from a Buk launcher.
A similar launcher was seen by journalists near the eastern Ukrainian town of Snizhne earlier today. The system can fire missiles up to an altitude of 72,000 feet.
Malaysian Airlines said it lost contact with one of its flights over Ukrainian air space. A statement said it had "lost contact of MH17 from Amsterdam. The last known position was over Ukrainian airspace. More details to follow".
The region has seen severe fighting between Ukrainian forces and pro-Russiam separatist rebels in recent days.
A Ukrainian fighter jet was shot down last night by a Russian plane, Ukrainian authorities said, adding to what Kiev says is mounting evidence that Moscow is directly supporting separatist insurgents in eastern Ukraine.
Security Council spokesman Andrei Lysenko said the pilot of the Sukhoi-25 jet hit by the air-to-air missile was forced to bail out.
Pro-Russia rebels alsoclaimed responsibility for strikes on two Ukrainian Sukhoi-25 jets, but Moscow denies Western charges that is supporting the separatists or sowing unrest in Ukraine.
Ukrainian president Petro Poroshenko appeared to blame separatists for the missile strike, saying the "armed forces of Ukraine did not take action against any airborne targets".
Malaysian prime minister Najib Razak said he was launching an immediate probe into the crash.
Malaysia's defence minister Hishamuddin Hussein said there had been no confirmation that the plane was shot down and added he had instructed the country's military to check and get confirmation.
Mr Poroshenko added: "We are sure that those who are guilty in this tragedy will be held responsible."