"In connection with the creation of a threat of encirclement, allied troops were withdrawn from the settlement of Krasny Liman to more advantageous lines," the defence ministry said, using the Russian name of the town.
Ukraine's capture of Lyman, which has served for months as a logistics and transport hub for Russian operations, marked a major defeat for Moscow, a day after President Vladimir Putin proclaimed the annexation of four Ukrainian regions. These include Donetsk, where Lyman is located.
The ministry said in a statement that Russia had inflicted serious losses on the Ukrainian forces by launching "massive fire strikes" against them. It did not provide evidence, and the claim could not be independently verified.
"Despite the losses suffered, the enemy, having a significant superiority in forces and means, introduced reserves and continued the offensive in this direction," it said.
(Reporting by Reuters; Editing by Gareth Jones)