Georgia has ordered its forces to cease fire, and offered to start talks with Russia over an end to hostilities in South Ossetia, Georgian officials say.
Earlier Georgia said its troops had pulled out of the breakaway region and that Russian forces were in control of its capital, Tskhinvali.
Thousands of civilians have fled the area, following heavy fighting that broke out on Thursday night.
The US has described Russia's actions as "dangerous and disproportionate".
US Deputy National Security Adviser James Jeffrey warned that if the Russian escalation continued, it would have a "significant" long-term impact on relations between Moscow and Washington.