Heavy fighting raged as Georgian troops surrounded the capital of its separatist region of South Ossetia, and President Mikheil Saakashvili accused Russia of arming the rebels and bombarding its territory.
Russia said Georgia had launched a "dirty adventure" and warned of unspecified retaliation, the foreign ministry said in a statement posted on its website.
In a national televised address Friday, Saakashvili called for a full mobilization: "Hundreds of thousands of Georgians should stand together to save Georgia."
Long military convoys were shown on television Friday on the road from western Georgia toward the separatist region.
Georgian troops now control a "large part of South Ossetia" and are seeing the rebel regions' capital Tskhinvali, Saakashvili said. "Tskhinvali is now liberated and fighting is ongoing now in the center."
At least 15 people, primarily civilians, were killed in heavy shelling and airstrikes of the capital Tskhinvali, news agency Interfax cited South Ossetian officials as saying.
Georgia accused three Russian Sukoi SU-24 aircrafts of bombing Georgian villages, and a short time later, sent out five of the same jet to carry out attacks on South Ossetia. Russia denied it had sent out bombers Friday.
Television footage showed many wounded in local hospitals and houses burning after heavy rocket bombardments in the mountainous South Caucasus region.
"A full-scale military aggression has been launched against Georgia," Saakashvili said in his speech, calling on Russia to "immediately stop bombardment of the Georgian towns."
But Russian Prime Minister Vladimir Putin blamed Georgia with initiating the "aggressive action" in televised comments from Beijing and said that Russia would be compelled to retaliate.
Most residents in South Ossetia and Georgia's other breakaway region of Abkhazia have been issued Russian passports in recent years. Over 2,500 Russian peacekeeping troops on under a 1994 ceasefire are based in the provinces.
"Bloodshed in South Ossetia will be on Georgia's conscience. We will not let anyone offend our peacekeepers and citizens of the Russian Federation," the foreign ministry said later Friday in a statement posted on its website.
Putin, in Beijing for the opening ceremonies of the games, said held talks with Chinese leaders and US President George W Bush, who had spoken with "one voice."
"Everybody agrees - nobody wants to see a war," he said.
But the United States is a close ally of the pro-Western Saakashvili, and it is its backing of Georgia's bid to join NATO in April that is seen to have escalated tension in the region.
Russia, which views NATO's open-door to Georgia as a threat to its security, has been stepping up ties with the rebel governments since April, countering Saakashvili's efforts to unite the small Caucasus nation ahead of NATO membership.
NATO head Jaap de Hoop Scheffer on Friday said he was "seriously concerned" over the escalation and called "on all sides for an immediate end of the armed clashes."
At an emergency session of the United Nations late Thursday, Russia failed to push through an agreement for an immediate halt to fighting from both sides.
