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The head of Russia’s Wagner paramilitary group said his mercenaries had captured Bakhmut in eastern Ukraine on Saturday, a claim the Ukrainian military denied even as their soldiers have been forced into an ever shrinking patch of land inside the ruined city.

Senior Ukrainian military officials acknowledged that the situation inside the city was “critical,” with soldiers facing an unrelenting barrage of artillery fire and powerful aerial bombardments. Nevertheless, they said, the Ukrainian forces were still engaged in combat operations.

The Russian Ministry of Defense and the Kremlin released a statement confirming the city had been “liberated,” hours after the declaration by the Wagner chief, Yevgeny V. Prigozhin, that the fight for the city was over. After nearly a year of fighting, Bakhmut has taken on an outsize importance: a symbol of Ukrainian defiance and of Russian leaders’ determination to blast their way to a small victory in a little-known corner of eastern Ukraine.

In a video posted on the Telegram messaging app on Saturday, Mr. Prigozhin, standing before what appeared to be the city’s destroyed railway station, held a Russian flag and declared victory. “Today, at noon, Bakhmut was completely taken,” Mr. Prigozhin said “We completely took the whole city, from house to house.”

About an hour later, Hanna Maliar, a deputy defense minister in Ukraine, said Ukrainian soldiers were still holding their ground in “certain industrial and infrastructure facilities” in the southwest corner of Bakhmut. There continued to be “heavy fighting,” she said in a brief statement.

The commander of Ukraine’s ground forces, Gen. Oleksandr Syrsky, said the battle for Bakhmut was not over. “Fighting continues for every meter of territory,” he said in a statement. He released a video Saturday afternoon that he said showed Ukrainian Special Forces operating in the city.

The Russian government late on Saturday released a statement claiming the conquest of the city “had been completed” and attributed the success to “offensive actions by the Wagner assault units” supported by artillery and aviation units.

A statement released by the Kremlin said President Vladimir V. Putin of Russia “congratulates Wagner assault teams as well as all Russian troops,” and promised that fighters would be “recommended for the state decorations.”

Military analysts and some Ukrainian officials have said that their stand in Bakhmut has served two strategic objectives tied to an anticipated counteroffensive: degrading the Russian forces and forcing Russian commanders to draw troops from elsewhere on the front lines, weakening defensive positions.

Lately, Ukrainian forces have been gaining ground on the flanks north and south of the city, forcing the Russian military to rush thousands of troops into the area, the British military intelligence agency wrote on Saturday. “With Russia likely maintaining relatively few uncommitted combat units in Ukraine, the redeployment represents a notable commitment by the Russian command.”

Mr. Prigozhin, who used his victory speech to issue yet another withering indictment of the Russian military establishment, was no doubt aware of its dilemma when he said he would pull his troops out of the city by May 25 — a threat he has issued before and not carried out.

For now, though, Wagner forces remain relentlessly on the attack.

Ukrainian soldiers who were fighting in the city as recently as last week described the nightmarish violence Wagner’s forces had unleashed in an effort to drive them from their final redoubts.

Most every night for the past two weeks, sometimes twice a night, the Russians have rained fire down on the Ukrainian positions in the form of incendiary munitions. As the fires burn, Russian artillery and tanks blast the positions day and night, and snipers lie in wait in battered buildings to keep the Ukrainians from bringing in reinforcements or moving troops out.

Satellite imagery and images taken by drones posted on social media by both Russian and Ukrainian forces testify to the annihilation of the city in some of the most intense urban combat in a generation.

Many buildings have been razed to the ground. Others are charred hulks. Few corners of the city are untouched. “In the city of Bakhmut, they turn buildings into ashes,” Ms. Maliar said on Friday night. “Only the foundation remains, which cannot be defended.”

While the Ukrainian forces may still be hanging on, they have been pulling back step-by-step over the months and could be planning to retreat to more easily defended ground.

Essentially, Ukraine seems to be trying to flip the script of the battle.

For nearly a year, it was the Russian forces attacking the Ukrainians inside the city while also seeking to encircle them. Now, with Wagner largely in control of the city, the Ukrainians seem to be trying to encircle the Russians through their attacks on the northern and southern flanks.

While the counterattacks have shifted momentum Ukraine’s way in some areas outside the city, the campaign is still in it early stages. The Ukrainian military said its forces have reclaimed about 12 square miles north and south of the city, but have acknowledged that the gains have come at a steep cost.

The battle for Bakhmut — a midsize city with limited strategic military value — has grown in significance as Ukraine held out far longer than some military analysts would have predicted. Bakhmut sits on low ground and is not a rail hub like other hard-fought over cities in the east such as Lyman or Izium.

The phrase “Bakhmut Holds” is emblazoned on T-shirts, and President Volodymyr Zelensky has called Bakhmut Ukraine’s “fortress.”

“We will fight for as long as we can,” he said in February, when Russian forces came perilously close to encircling Ukrainian soldiers in the city.

Mr. Zelensky was in Japan on Saturday urging the world’s richest democracies to hold together even as the Kremlin hopes war fatigue will undermine the resolve of Kyiv’s allies. His office did not have any immediate comment on the claims of the Wagner boss.

Ukrainian military commanders have suggested there might be a time when they would pull troops from the city itself, but that would not be the end of the battle of Bakhmut.

Serhiy Cherevaty, the spokesman for Ukraine’s forces fighting in the east, said on Friday night that Ukrainian soldiers would continue to fight in the city “as long as it inflicts the utmost damage to the enemy and allows us to preserve our forces.”

Earlier this month, the White House estimated that since December Russia has suffered 100,000 casualties, including more than 20,000 killed, with many of the losses suffered in Bakhmut.

Ukraine has also suffered heavy losses over months of brutal combat, but it rarely updates its casualty count.

Mr. Prigozhin, who recruited tens of thousands of convicts to bolster his military campaign and sent many to their deaths in headlong charges of Ukrainian positions, blamed the Russian military establishment for the excessive casualties Wagner suffered.

“We weren’t only fighting the Ukrainian army in Bakhmut, we were also fighting the Russian bureaucracy that was disturbing our efforts,” Mr. Prigozhin said on Saturday. “Because of their whims, five times more guys died than had to die.”

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