His warning came as Russian artillery strikes continued to pound the city amid an intense effort by Vladimir Putin’s forces to gain full control of the region.
“This is a very brutal battle, very tough, perhaps one of the most difficult throughout this war,” Mr Zelensky said in a video statement on Wednesday night.
“Severodonetsk remains the epicentre of the encounter in Donbas ... Largely, that is where the fate of our Donbas is being decided now,” he added.
Russian forces have concentrated their offensive on the Donbas after failing to take Kyiv and other key cities in north and central Ukraine. Large swathes of the eastern region have been under the control of Moscow-backed separatists since an uprising backed by Mr Putin in 2014.
Ukrainian fighters in Severodonetsk pulled back to the city’s outskirts on Wednesday but have vowed to fight there for as long as possible. Earlier this week, Mr Zelensky said that the city was “dead” after weeks of intense Russian shelling.
Luhansk’s regional governor Serhiy Gaidai told Ukrainian television late on Wednesday that Ukrainian forces were “hanging on” in the Severodonetsk industrial zone but no longer control the entire city.
“Fighting is going on not just in the industrial zone, but right in the city of Severodonetsk,” he said.
“It is impossible to say the Russians completely control the city.”
Ukrainian forces still control all of Severodonetsk’s smaller twin city Lysychansk but Russian forces were destroying residential buildings there, Mr Gaidai said.
Around 15,000 civilians remain in both cities, he added.
Valentyna Tsonkan, an elderly resident of the city, told the Associated Press that her house had been hit by a Russian missile.
“I was lying on my bed. The shrapnel hit the wall and went through my shoulder,” she said as she received treatment for her wounds.
Oleksiy Arestovych, an adviser to Mr Zelensky, said Russian forces had changed their tactics in the battle, retreating from the city while pounding it with artillery and airstrikes.
The city centre has been deserted as a result, he said, with missiles hitting empty spaces.
“They are hitting hard without any particular success,” he said in his daily online interview on Wednesday.
Kyiv’s ambassador to the United States Oksana Markarova told CNN that Ukrainian troops were vastly outnumbered in the Donbas but would “get back” any region that fell under Russian control.
In other developments, a United Nations report warned that Russia’s invasion of Ukraine is intensifying the suffering of millions of people across the world by increasing food and energy prices.
The report, by the UN Global Crisis Response Group, said the war had “has exacerbated a global cost-of-living crisis unseen in at least a generation”.
Ukraine is the world’s fifth-largest exporter of wheat and the top exporter of sunflower oil but the majority of its exports are transported through Black Sea ports, which have been blockaded by Russian forces.
There are fears that devastating food price rises in countries in the Middle East and Africa could spark a global hunger crisis, with western countries urged to find ways to end the Russian blockade.