"Quite simply, what we see from Russia is an illegal and illegitimate effort to destabilize a sovereign state and create a contrived crisis with paid operatives across an international boundary," Kerry told members of the Senate Foreign Relations Committee on Tuesday.
He added that Washington and its allies are ready to impose tough new sanctions “on those orchestrating this action and on key sectors of the Russian economy — in energy, banking, mining — they’re all on the table.”
"Their economy is not that strong. They don't make a lot in Russia," Kerry said.
“The United States and our allies will not hesitate to use 21st century tools to hold Russia accountable for 19th century behavior,” he said.
The top US diplomat also accused Moscow of carrying out separatist activities in eastern Ukraine and using them as a “pretext for military intervention.”
He made the remarks following the seizure of regional administration buildings by pro-Russia activists in several eastern Ukrainian cities.
Kerry accused Russian special forces and agents of being “the catalysts behind the chaos of the last 24 hours” in eastern Ukraine. Russia has denied the accusations.
Earlier on Tuesday, NATO chief Anders Fogh Rasmussen warned Russia against what he called a historic mistake, if it further intervened in Ukraine.
US President Barack Obama has already signed an executive order to implement sanctions if Russia does not de-escalate its actions in Ukraine.
The United States says Russia is behind the current unrest in the eastern Ukrainian cities of Kharkiv, Donetsk, Luhansk and Mariupol.
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