The Boeing 777 went down near the Russian border according to an aviation industry source.
According to the Interfax News Agency flight MH17 was travelling from Amsterdam to Kuala Lumpur when it was downed.
The news agency claimed that the Malaysian Airlines passenger plane was shot down by Russian authorities but that has yet to be confirmed.
A Malaysia Airlines official has confirmed the plane has crashed and they are due to make a statement shortly.
There has been firing in the region earlier today when a Ukrainian war plane was shot down.
Russia angrily denied reports it was to blame for the attack on a Ukrainian airforce SU-25 earlier today, which happened just miles from the latest air disaster.
The pilot of the downed fighter jet ejected and was later evacuated by Ukrainian forces, said Kiev sources.
"A military plane from the air force of the Russian Federation carried out a rocket strike on a Ukrainian air force SU-25 as it fulfilled its task over the territory of Ukraine," said Kiev's National Security and Defence Council .
But the Kremlin issued denials, although there are questions as to why commercial jets were still flying in an area of intense fighting between Russia over disputed Ukrainian territory.
The news comes after a Malaysian Airlines plane carrying 239 people went missing in March while on a flight from the Malaysian capital to Beijing.
The country's government said they believed all people onboard MH370 were dead after a lengthy search in the Indian Ocean.
The plane, which had 227 passengers onboard, vanished on March 8 and despite a search costing in excess of £25million no trace of the airline has been found.
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