Iran has 30 days to return to the negotiating table or face isolation, foreign ministers from the US and five other major powers have warned.
Iran insists its nuclear programme is for peaceful means
The comments at talks in Berlin reinforced a deadline in a statement by the UN Security Council, which urged Iran to halt uranium enrichment.
However the UN nuclear watchdog's chief said Iran was not an imminent threat and sanctions would be a "bad idea".
Iran says its activities are peaceful and has rejected the Council's call.
The UK's Jack Straw warned sanctions could follow if Iran remained defiant.
But speaking in Qatar, the International Atomic Energy Agency (IAEA) chief said sanctions were "a bad idea".
"We need to lower the pitch," Mohamed ElBaradei said.
The Berlin talks included the five veto-wielding permanent members of the Council - the US, China, France, Russia and the UK - as well as Germany.
The foreign ministers were discussing what to do if Iran refused to drop its nuclear ambitions.
Their talks came a day after the UN Security Council finally approved a non-binding call on Iran to end uranium enrichment, after weeks of wrangling.
"Iran has a choice between isolation brought about through enrichment" or a return to talks, German Foreign Minister Frank-Walter Steinmeier said.
US Secretary of State Condoleezza Rice said the meeting sent "a very strong signal to Iran that the international community is united".
The British foreign secretary said "the onus is on Iran to show the international community that its programme is entirely for civil purposes".
When asked by reporters if the Council might pass a legally binding resolution if Iran did not comply, Mr Straw said: "It can certainly include a resolution... and the possibility of measures after that."
Asked if such measures could include sanctions, he said: "It could do."
However, Russian Foreign Minister Sergei Lavrov said his country remained opposed to such a move against the Islamic Republic.
The "sole solution" would come through the IAEA, he said.
The 15-member Security Council unanimously approved the non-binding statement on Wednesday - one month after Iran's nuclear activities were reported to the Council by the IAEA.
The statement was the third version of a draft drawn up by France and the UK, which made significant concessions to Russia and China.
Moscow and Beijing, both allies of Iran, were concerned that Security Council involvement could lead to sanctions against Iran and wanted the IAEA to take the lead.
Iran was defiant. "We will not, definitely, suspend enrichment," its ambassador to the International Atomic Energy Agency, Aliasghar Soltaniyeh, said earlier on Thursday.
Iranian Foreign Minister Manouchehr Mottaki said Tehran was still open to talks on the issue with the IAEA, but that there was "mistrust" over negotiations with European nations.
He condemned the West's "unjustified propaganda", insisting that Iran's nuclear programme was peaceful.