Hundreds of civilians were reported dead in the worst outbreak of hostilities since the province won defacto independence in a war against Georgia that ended in 1992. Witnesses said the South Ossetian capital of Tskhinvali was devastated.
"I saw bodies lying on the streets, around ruined buildings, in cars," said Lyudmila Ostayeva, 50, who had fled with her family to Dzhava, a village near the border with Russia. "It's impossible to count them now. There is hardly a single building left undamaged."
The fighting broke out as much of the world's attention was focused on the start of the Olympic Games and many leaders, including Russia's Prime Minister Vladimir Putin and President Bush, were in Beijing.
The timing suggests Georgian President Mikhail Saakashvili may have been counting on surprise to fulfill his longtime pledge to wrest back control of South Ossetia - a key to his hold on power.
Saakashvili agreed the timing was not coincidental, but accused Russia of being the aggressor. "Most decision makers have gone for the holidays," he said in an interview with CNN. "Brilliant moment to attack a small country."
The Russian stock market plunged around 6.5 percent on Friday, apparently in response to the fighting.
Diplomats called for another emergency session of the United Nations Security Council, its second since early Friday morning seeking to prevent an all-out war.
"The deepening conflict between Russia and Georgia is particulary vexing to the U.N. Security Council which met well into the night Thursday and again on Friday to reach an agreement on how to phrase a call for an end to the use of force and a return to the negotiating table," said CBS News Foreign Affairs Analyst Pamela Falk from U.N. headquarters.
"Since Russia is a veto-holding member of the U.N. Security Council, the negotiations were an attempt to keep Russia on board while the U.S. took a stand in support of the pro-Western government of Georgia and defended what it called Georgia's sovereignty and terroritorial integrity," said Falk, "but the fighting on the ground made an agreement difficult since neither Russia nor Georgia are a member of NATO."
Secretary of State Condoleezza Rice had spoken to the parties involved and was, State Department spokesman Gonzalo Gallegos told reporters.
CBS News correspondent Richard Roth reports that while Russia's plans remain unclear, both sides have strong political interests in keeping a lid on the violence. While Georgia hopes to join NATO, Russia would likely prefer to avoid conflict in a region so close to its own city of Sochi - slated to host the Winter Olympics in 2014.
Georgia, which borders the Black Sea between Turkey and Russia, was ruled by Moscow for most of the two centuries preceding the breakup of the Soviet Union. Georgia has angered Russia by seeking NATO membership - a bid Moscow regards as part of a Western effort to weaken its influence in the region.
The U.N. refugee agency said Friday that hundreds were fleeing the fighting in South Ossetia and seeking safety elsewhere in Georgia or neighboring Russia.
The leader of South Ossetia's rebel government, Eduard Kokoity, said about 1,400 people were killed in the onslaught, the Interfax news agency reported. The toll could not be independently confirmed.
Ten Russian peacekeepers were killed and 30 wounded when their barracks were hit in Georgian shelling, said Russian Ground Forces spokesman Col. Igor Konashenkov. Russia has soldiers in South Ossetia as peacekeeping forces but Georgia alleges they back the separatists.
Georgia's Foreign Ministry accused Russian aircraft of bombing two military air bases inside Georgia, inflicting some casualties and destroying several military aircraft. Rustavi 2 television said four people were killed and five wounded at the Marneuli air base.
Russia's Defense Ministry said it was sending reinforcements for its peacekeepers, and Russian state television and Georgian officials reported a convoy of tanks had crossed the border. The convoy was expected to reach the provincial capital, Tskhinvali, by evening, Channel One television said.
The International Committee of the Red Cross, citing local medical officials, said that Tskhinvali's main hospital had closed down after coming under fire from artillery.
Water, electricity and telephone lines in the city also have been cut off, ICRC spokeswoman Maia Kardava said by telephone from the Georgian capital, Tbilisi.
Georgian State Minister for Reintegration Temur Yakobashvili said government troops were now in full control of Tskhinvali, but the RIA-Novosti news agency quoted Konashenkov as saying late Friday that Russian tanks were firing on Georgian positions in the city.
"We are facing Russian aggression," said Georgia's Security Council chief Kakha Lomaya. "They have sent in their troops and weapons and they are bombing our towns."
Putin has warned that the Georgian attack will draw retaliation and the Defense Ministry pledged to protect South Ossetians, most of whom have Russian citizenship.
Chairing a session of his Security Council in the Kremlin, Russian President Dmitry Medvedev also vowed that Moscow will protect Russian citizens.
"In accordance with the constitution and federal law, I, as president of Russia, am obliged to protect lives and dignity of Russian citizens wherever they are located," Medvedev said, according to Russian news reports. "We won't allow the death of our compatriots go unpunished."
On Friday, an AP reporter saw tanks and other heavy weapons concentrating on the Russian side of the border with South Ossetia supporting the reports of an incursion. Some villagers were fleeing into Russia.
"I saw them (the Georgians) shelling my village," said Maria, who gave only her first name. She said she and other villagers spent the night in a field and then fled toward the Russian border as the fighting escalated.
Yakobashvili said Georgian forces had shot down four Russian combat planes over Georgian territory but gave no details. Russia's Defense Ministry denied an earlier Georgia report about one Russian plane downed and had no immediate comment on the latest claim.
Yakobashvili said that one Russian plane had dropped a bomb on the Vaziani military base near the Georgian capital, but no one was hurt.
More than 1,000 U.S. Marines and soldiers were at the base last month to teach combat skills to Georgian troops. Georgia has about 2,000 troops in Iraq, making it the third-largest contributor to coalition forces after the U.S. and Britain.
South Ossetia officials said Georgia attacked with aircraft, armor and heavy artillery. Georgian troops fired missiles at Tskhinvali, an official said, and many buildings were on fire.
Georgia's president said Russian aircraft bombed several Georgian villages and other civilian facilities.
A senior Russian diplomat in charge of the South Ossetian conflict, Yuri Popov, dismissed the Georgian claims of Russian bombings as misinformation, the RIA-Novosti news agency reported.
Russia's Defense Ministry denounced the Georgian attack as a "dirty adventure." "Blood shed in South Ossetia will weigh on their conscience," the ministry said in a statement posted on its Web site.
Saakashvili long has pledged to restore Tbilisi's rule over South Ossetia and another breakaway province, Abkhazia. Both regions have run their own affairs without international recognition since splitting from Georgia in the early 1990s and built up ties with Moscow.
Relations between Georgia and Russia worsened notably this year as Georgia pushed to join NATO and Russia dispatched additional peacekeeper forces to Abkhazia.
The Georgian attack came just hours after Saakashvili announced a unilateral cease-fire in a television broadcast late Thursday in which he also urged South Ossetian separatist leaders to enter talks on resolving the conflict.
Georgian officials later blamed South Ossetian separatists for thwarting the cease-fire by shelling Georgian villages in the area.