Mrs Merkel and Mr Sarkozy said sanctions needed to be stronger
Germany has warned Iran that it would support tougher sanctions if diplomatic efforts to stop the Iranians acquiring nuclear weapons broke down.
Speaking at a security conference in Munich, German Chancellor Angela Merkel said she would back any change in approach by US President Barack Obama.
French leader Nicolas Sarkozy appealed to Russia to add to the pressure on Iran to stop enriching uranium.
Iran says it wants the uranium for nuclear power, not weapons.
Russia is building Iran's first nuclear power plant and expects to fire it up by the end of this year, but insists it is for purely civilian use, and cannot be used for military purposes.
Referring to the US stance of opening communication with Iran, Mrs Merkel said: "We are ready to walk this path together. But we are also ready for tougher sanctions if there is no progress."
Mr Sarkozy, also speaking at the conference, said Russian co-operation on imposing sanctions was necessary.
"We need the Russians to help so that sanctions against Iran are effective," he said.
"We have only one solution left, reinforce sanctions against Iran and link Russia to this process."
US Vice-President Joe Biden, in a wide-ranging speech about the foreign policy of President Barack Obama's new administration, said Iran needed to decide on its future course.
"We will be willing to talk to Iran, and to offer a very clear choice: continue down your current course and there will be pressure and isolation; abandon the illicit nuclear program and your support for terrorism and there will be meaningful incentives."
President Obama has announced a review of US policy towards Iran.
"Iran has acted in ways that are not conducive to peace in the region or to the prosperity of its people; its illicit nuclear program is but one of those manifestations," Mr Biden said.
He added: "We will continue to develop missile defences to counter a growing Iranian capability, provided the technology is proven to work and cost effective."
British Foreign Secretary David Miliband said Iran should take advantage of the US change in policy.
"It is not going to get any better than this.
"It's not going to get better than an American administration saying we want normal relations with Iran."