The space agency, Roscosmos, said in a statement that a Proton-M rocket carrying a Mexican satellite had suffered a problem on launch.
"An emergency situation took place when the Proton-M rocket launched with a MexSat-1 satellite. The reasons are being identified," Roscosmos space agency said in a statement.
A source in the space agency told RIA Novosti state news agency that the Proton rocket lost communications with the ground about a minute before the satellite was supposed to separate from the third stage rocket.
The satellite failed to separate from the rocket and would be unable to function.
"The Mexican satellite is lost. Launches of rockets of the Proton type will be grounded until the reason is identified," the source added.
The launch took place at 8:47 am Moscow time (0547 GMT)from Russia's Baikonur cosmodrome in Kazakhstan.
The accident took place hours after the engines of a Progress M-262M spacecraft docked to the International Space Station failed to switch on at the scheduled time to correct its orbit, the space agency said.
"The reasons are being studied by specialists at the flight control centre. Roscosmos will give out further information when it is available."
A space industry source told RIA Novosti that a second attempt to switch on the Progress's engines might be made on Monday unless checks found "serious problems."
The problems come less than a month after an unmanned Progress supply ship taking cargo to the ISS lost contact with Earth shortly after launch on April 28 and later plunged and burnt up in the atmosphere on May 8.
The accident has caused Roscosmos to postpone the return of three astronauts on the ISS who were due to return to Earth Friday until June, while the next manned launch has also been delayed.
Russia has recently suffered a series of problems exposing shortcomings in its space programme.
Another Progress supply ship crashed in Siberia shortly after launch in 2011. Moscow has also lost several lucrative commercial satellites.
Since the mothballing of the US Space Shuttle programme, Moscow has had a monopoly on sending astronauts to the ISS from its Baikonur cosmodrome in Kazakhstan.