The US president has said the international community is pursuing "a significant regime of sanctions" against what Washington calls Iran's intransigence.
Barack Obama's comments come after Tehran said on Tuesday that it had begun the process of enriching uranium at higher levels, fuelling fears that the process could eventually be used to produce nuclear weapons.
In his most extensive remarks on Iran in some time, Obama said the door was still open for Iran to enter into negotiations with major powers on its nuclear programme, but he made it clear the US was now focused on sanctions.
"What we are going to be working on over the next several weeks is developing a significant regime of sanctions that will indicate to them [the Iranian government] how isolated they are from the international community as a whole," he said.
Obama said the US, Russia, China, France, Britain and Germany were "moving along fairly quickly" to toughen measures against Iran.
On Tuesday, Iran announced it had begun work to further enrich its stockpile of uranium to 20 per cent, saying the higher grade uranium will be made into fuel for a medical research reactor in the capital.
The process was begun at the Natanz facility amid mixed signals from Tehran as to whether it will accept a proposal by the UN nuclear agency, the International Atomic Energy Agency (IAEA), to ship most of its 3.5 per cent enriched uranium abroad to be upgraded to fuel the reactor.
Obama said that the beginning of the enrichment process suggested that Tehran had spurned the IAEA offer.
"Despite the posturing that the nuclear power is only for civilian use ... they in fact continue to pursue a course that would lead to weaponisation, and that is not acceptable to the international community," Obama said.
Ali Akbar Salehi, the head of Iran's nuclear programme, has kept the door open to the uranium exchange.
"Whenever they provide the fuel, we will halt production of 20 per cent," he told state television on Monday.
Tehran's latest move has also drawn an unusually sharp reaction from Russia, which Obama praised as "forward-leaning" on the issue.
Russia, which has close ties to Iran and has opposed new sanctions in the past, appears to have edged closer to Washington's position, saying the new enrichment plans showed that suspicions about Iran's intentions appeared to be well-founded.
Nikolai Patrushev, the secretary of Russia's presidential security council, was quoted by the Interfax news agency as saying: "Political-diplomatic methods are important for a resolution, but there is a limit to everything."
China urges talks
No new UN security council sanctions can be passed without unanimous agreement from all permanent members, including China, which has been reluctant to impose new punitive measures on Iran.
China was on Tuesday alone among the six negotiating powers of the so-called P5+1 group in calling for more talks to resolve the issue.
"We hope the relevant parties will exchange views on the draft deal on the Tehran research reactor and reach common ground at an early date which will help solve the issue," Ma Zhaoxu, a Chinese foreign ministry spokesman, said.
Obama said "how China operates at the security council as we pursue sanctions is something that we're going to have to see".
US officials said this week Washington was prepared to help Iran obtain medical isotopes from third-country sources, calling it a "faster, cheaper and more responsible alternative" to the IAEA proposal than the Iranian government's.
Although a nuclear bomb requires about 90 per cent purity, getting to 20 per cent is a big step because low-level enrichment is the most time-consuming and difficult stage of the process.