The most important ship in Russia’s Black Sea fleet, the Moskva missile cruiser, was badly damaged after ammunition on board blew up, the Russian defence ministry said on Thursday.
Russia said the crew members of its fleet were evacuated and measures were being taken to tow the ship back to port, reports Reuters.
Ukraine said the ship was caused by a missile strike.
Russia's defence ministry said the fire on the Soviet-era missile cruiser Moskva had been contained, but left the ship badly damaged. It did not acknowledge the ship had been attacked and said the cause of the fire was under investigation.
Ukraine's southern military command said that it hit the warship with a Ukrainian-made Neptune anti-ship missile and that it had started to sink.
The loss or disabling of the Moskva would be another blow for Russia - on the 50th day of its war in Ukraine - as it readies for a new assault in the eastern Donbas region that is likely to define the outcome of the conflict.
Russia's navy has launched cruise missiles into Ukraine and its activities in the Black Sea are crucial to supporting land operations in the south of the country, where it is battling to seize full control of the port of Mariupol.
Russian news agencies said the Moskva, commissioned in 1983, was armed with 16 anti-ship Vulkan cruise missiles with a range of at least 700 km (440 miles).
Kyiv says the Moskva featured in one of the landmark early exchanges of the war, when Ukrainian border guards on Snake Island, a small outcrop in the Black Sea, told the ship to "Go fuck yourself" after it demanded they surrender.