Wagner Group fighters entered the southern Russian city of Rostov-on-Don in an apparent armed rebellion.
What happens next will largely depend on the loyalty of Russia's security forces, the department said.
"With very limited evidence of fighting between Wagner and Russian security forces, some have likely remained passive, acquiescing to Wagner," the department said.
The loyalty of Russia's security forces, particularly the Russian National Guard, will be "key to how the crisis plays out," it added.
Unverified videos have circulated on social media appearing to show Wagner fighters moving through the Voronezh region toward Moscow.
Persons:
Wagner, —, Vladimir Putin, Putin, Sergei Sobyanin, Yevegny Prigozhin
Organizations:
Wagner Group, MoD, Service, Group, UK Department of Defense, Russian National Guard, Guardian
Locations:
Russian, Rostov, Moscow, Russia, Ukraine, Voronezh Oblast, Voronezh