The US and EU have condemned President Vladimir Putin's first visit to Crimea since Russia annexed the peninsula from Ukraine in March.
The US state department said the trip was 'provocative and unnecessary'. The Kiev government called it a 'gross violation of Ukraine's sovereignty'.
Mr Putin praised Crimea for joining Russia, as he marked the Soviet victory over the Nazis in World War Two.
As he visited, there were deadly new clashes in south-eastern Ukraine.
Ukraine's interior minister said at least 20 pro-Russian activists and a Ukrainian security officer died in the clashes in the port of Mariupol.
At the scene
Victory Day is supposed to be about remembering the sacrifices of World War Two, but today in Sevastopol it became a party. People brought picnics and reserved tables in the restaurants with the best views.
Children cheered the soldiers, who marched past wearing their new orange and white ribbon medals, won for 'the return of Crimea'.
The parade was small but the crowds were huge, and then, after lunch, the Kremlin security men arrived. Slowly the main square was cleared and anticipation grew. Then off a boat stepped President Putin, landing in a city that he says never stopped being Russian.
The people of Sevastopol brought their white, blue and red flags and hailed him like a conquering hero. They were treated to a rare moment when he shook hands. It was an occasion that more than ever brought home the Russian annexation of Crimea. Mr Putin was able to walk unhindered and unchallenged through the main square of a city which the rest of the world believes is still part of Ukraine.
The government said there was a gun battle when pro-Russian activists tried to storm a police HQ.
However, some local witnesses accused the security forces of opening fire on unarmed protesters who had entered the building. Local officials put the casualties at seven dead and 39 injured.
Crimea voted to join the Russian Federation in March and pro-Russian separatists in Ukraine's eastern Donetsk and Luhansk regions are planning to hold secession referendums on Sunday.
The separatists remain in control of many official buildings across the south and east despite a military operation by Kiev to remove them. Dozens have been killed in the unrest.
'Inappropriate'
US state department spokeswoman Jen Psaki called Mr Putin's trip provocative and unnecessary, adding: 'Crimea belongs to Ukraine and we don't recognise of course the illegal and illegitimate steps by Russia in that regard.'
US National Security Council spokeswoman Laura Magnuson said the visit 'only served to fuel tension'.
Maja Kocijancic, a spokeswoman for EU foreign policy chief Catherine Ashton, said the EU 'regretted' the presence of Mr Putin at a military parade in Crimea's port of Sevastopol.
'An important day in our shared history, dedicated to honouring the enormous sacrifices and giving remembrance to the millions of dead in the Second World War, should not have been instrumentalised to give visibility to the illegal annexation of Crimea,' she said.
Nato's Secretary General Anders Fogh Rasmussen said Mr Putin's visit was 'inappropriate'.
US Secretary of State John Kerry and Russian counterpart Sergei Lavrov spoke again by telephone on Friday, but both sides later reiterated their stated positions.
Ms Psaki said Russia should tell the separatists to lay down their arms and abandon plans for secessionist referendums.
Russia's foreign ministry said Mr Lavrov had urged the US to influence Kiev to stop its military operations against separatists.
During his visit to Crimea, Mr Putin said the peninsula had shown loyalty to a 'historical truth' in choosing to be part of Russia.
Crimea crisis timeline 21 Nov 2013: President Viktor Yanukovych abandons an EU deal Dec: Pro-EU protesters occupy Kiev city hall and Independence Square 22 Feb: Mr Yanukovych flees; parliament votes to remove him and calls election 27-28 Feb: Pro-Russian gunmen seize key buildings in Crimean capital Simferopol 6 Mar: Crimea's parliament asks to join Russia and sets referendum for 16 March 16 Mar: Crimeans back proposal to join Russia 21 Mar: President Putin signs annexation law
He said: 'There is a lot of work ahead but we will overcome all difficulties because we are together, which means we have become stronger.'
The BBC's Daniel Sandford in Sevastopol says Mr Putin was treated as a conquering hero as he walked through the main square and shook hands with Crimeans.
Mr Putin earlier addressed thousands during a huge military parade in Moscow's Red Square, vowing to defend the 'motherland'.
Ukraine's interim authorities held a brief veterans' ceremony in Kiev's main park.
The authorities feared pro-Russian activists would try to stoke violence if the celebrations were higher profile.
Nazi Germany invaded the USSR - which included Ukraine - in June 1941. Crimea was put under Ukrainian administration in 1954.
In the chaos that followed the ousting of pro-Russian President Viktor Yanukovych in February this year, Russian forces took over most of the peninsula.
Crimeans then held a referendum and voted to join Russia, though the vote was derided by Kiev and the West.
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