The BBC's John Simpson reports on "day one of the new Crimea"
Russian President Vladimir Putin has signed a decree recognising Crimea as a sovereign state, paving the way for it to be absorbed into Russia.
The decree said it had taken into account Sunday's referendum in Crimea, in which officials said 97% of voters backed breaking away from Ukraine.
The EU and US said the referendum was illegal and imposed sanctions on 21 officials from Russia and Ukraine.
Crimea was taken over by pro-Russian gunmen in late February.
The incursion came after President Viktor Yanukovych fled to Russia following months of street protests.
The Kremlin officially denies the gunmen are Russian soldiers, but concedes that MPs authorised Mr Putin to use force after a formal plea for help from Mr Yanukovych.
Crimea has been part of Ukraine since 1954, but much of its population is ethnic Russian.
Ukrainian military bases in Crimea are still surrounded by soldiers who have no identifying insignia
In Kiev, Ukrainians gathered to support the new government's attempts to repel Russia's moves in Crimea
The EU and US published separate lists of sanctions involving travel bans and asset freezes against both Russian and Ukrainian government officials and MPs.
They included Crimea's acting leader Sergei Aksyonov and parliamentary speaker Vladimir Konstantinov.
The US list included Dmitry Rogozin, a Russian deputy prime minister, Valentina Matviyenko, head of the upper house of the Russian parliament, and Mr Yanukovych.
US President Barack Obama said in a news conference that Washington stood "ready to impose further sanctions" depending on whether Russia escalated or de-escalated the situation in Ukraine.
But he also stressed there was still a path to solve the crisis diplomatically.
'Negative spiral'
EU foreign policy chief Catherine Ashton said those singled out were responsible for threatening Ukraine's territorial integrity and independence.
But there was still time to avoid "a negative spiral" in the situation, she added, urging Russia to withdraw its forces from Crimea.
Russian Deputy Foreign Minister Sergei Ryabkov accused the US of a "pathological unwillingness to acknowledge reality".
He said they wanted to "impose their own unilateral, unbalanced approaches" on the rest of the world.
Ukraine's acting President Olexander Turchynov said Kiev was ready for negotiations with Russia, but it would never accept the annexation of Crimea.
The Kiev authorities earlier said they had recalled their ambassador to Moscow for consultation.
Crimea's regional parliament, which was disbanded by Kiev last week, earlier declared independence.
MPs said Ukrainian laws now no longer applied in the region, and all Ukrainian state property belonged to an independent Crimea.
The peninsula will adopt the Russian currency, and clocks will move two hours forward to Moscow time by the end of March, the MPs' declaration said.
The document also appealed to "all countries of the world" to recognise Crimean independence.
More than 10% of Crimea's population is ethnic Tatar, many of whom were sent to gulags by Soviet dictator Joseph Stalin.
They were only able to return to Crimea after the collapse of the USSR, and many took no part in the referendum.
Ukrainian presidential hopeful Vitali Klitschko said he feared the Tatars would be targeted with "ethnic cleansing" if Russia was allowed to take over.
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