The Defence Ministry said in a statement the Il-76 plane was shot down in a "cynical" attack by rebels using an anti-aircraft weapon and a heavy-caliber machine gun.
It gave no death toll but Vladislav Seleznyov, spokesman for the military operation in east Ukraine, said by phone: "Forty-nine people were killed. All were Ukrainian military personnel."
Read MoreRussia sent tanks to Ukraine rebels, US says
The Prosecutor General's office said nine crew and 40 paratroopers had been killed and that the plane was hit by an anti-aircraft missile at 1:10 a.m. (2210 GMT on Friday).
The Luhansk region is at the heart of the rebellion launched in April by separatists who want Russia to absorb the Russian-speaking east following the annexation of Crimea in March.
Government forces control Luhansk airport but local media said fighting was under way on Saturday in the city, control of which is important for patrolling the nearby border with Russia.
The rebels also said the Ukrainian air force had fired on the industrial town of Horlivka, just north of region's main city, Donetsk.
Rebels also shot down a military cargo plane last week, killing three people, and a general was among 14 killed when they hit an Mi-8 transport helicopter on May 29.
Scores of rebels, civilians and soldiers have been killed in the violence since April and more than 100 protesters, most of them seeking closer ties with the West, were killed in clashes with police in February which led to the fall of Ukraine's Moscow-leaning president.
The new clashes this week, in which government forces reclaimed the southeastern port city of Mariupol on Friday, threaten tentative peace moves since the new president, Petro Poroshenko, was sworn in a week ago.
The breakdown of talks on a dispute over the price Kiev pays for Russian natural gas has also soured the atmosphere, with Moscow threatening to cut supplies to Kiev on Monday unless it starts paying its bills.
US says Russia sending in weapons
Russia fears it is losing influence in Ukraine which was governed from Moscow in Soviet times and is seen by Russians as the cradle of their civilization; but it denies being behind the uprising. The rebels say they get weapons from army stockpiles and warehouses.
The U.S. State Department said on Friday, however, that Russia had sent tanks, heavy weapons and rocket launchers to Ukraine in recent days in support of separatists.
Read MoreUkraine braces for Russian gas cuts from Monday
The assertion by the United States that Russian tanks had been brought across the border into Ukraine is likely to deepen strains in the worst standoff between Moscow and the West since the Cold War ended.
"We assess that separatists in eastern Ukraine have acquired heavy weapons and military equipment from Russia, including Russian tanks and multiple rocket launchers," State Department spokeswoman Marie Harf said in a statement.
Harf told a briefing earlier that a convoy of three T-64 tanks, several MB-21 "or Grad" multiple rocket launchers and other military vehicles had crossed from Russia into Ukraine in the last three days.
"This is unacceptable," she said. "A failure by Russia to de-escalate the situation will lead to additional costs."
Evidence that Russia is sending in heavy armor and weapons could encourage the United States and the EU to impose new sanctions on Moscow, so far limited largely to visa bans and asset freezes on some individuals, banks and companies.
Kiev called for new talks to be held on the natural gas dispute over the weekend but there was no word on Saturday of any meetings being scheduled.
Ukraine said on Friday it was preparing for supply cuts on Monday, the deadline for it to settle $1.95 billion in unpaid bills. This could also disrupt supplies to the EU, as about half of its sizable gas imports from Russia flow via Ukraine.