President Obama has said that Russia cannot redraw the borders in Ukraine behind the “barrel of a gun”.
Speaking at a press conference with German Chancellor Angela Merkel, he said diplomacy was still the main strategy for ending the fighting.
The President has been under political pressure at home to arm Ukrainian forces against pro-Russian rebels.
Mrs Merkel is against a military solution but the President said he was still looking at the option.
He told reporters: “The possibility of lethal defensive weapons is one of those options that is being examined, but I have not made a decision about that yet.”
President Obama said Russia would be further isolated if it continued to send troops and support and arm rebels who have taken over large areas of Ukraine.
“We are in absolute agreement that the 21st century cannot have us stand idle and simply allow the borders of Europe redrawn with the barrel of a gun,” said the President.
Russia denies sending troops and arming the rebels.
President Obama said the separatists had completely violated September’s Minsk agreement to ease the fighting and Russia had instead plowed in more tanks and artillery.
Economic and political sanctions will stay in place while Russia continues its involvement in Ukraine, the two leaders said.
Mrs Merkel said it was crucial for the West to stand up to Russian aggression.
“If we give up this principle of territorial integrity of countries, then we will not be able to maintain the peaceful order of Europe,” said the German Chancellor.
The leaders of Ukraine, Germany, France and Russia are preparing for a summit in Minsk on Wednesday, aiming to end the conflict which has killed more than 5,000 people.
Mr Putin also hosted Mrs Merkel and the French leader Francois Hollande for talks in the Kremlin on Friday.
The Wall Street Journal reported Mrs Merkel had given Mr Putin until Wednesday to agree to a peace plan.
But the Kremlin reportedly hit out at that suggestion, saying “nobody has ever talked to the president in the tone of an ultimatum”.
New visa bans and asset freezes on Ukrainian separatists and Russians are understood to be on hold until 16 February to give peace talks a chance.
Pro-Russian rebels annexed the Crimea region of southern Ukraine last year and has also taken control of areas in the east of the country, in the Donetsk and Luhansk regions.
Ukrainian forces have been fighting to take back territory, with violence escalating markedly in the last few weeks.
Running water, power and food all in scarce supply as villages near the frontline suffer the effects of rocket fire and shelling.
Up to 10 people also died last week when shells hit a hospital and other buildings in the rebel-held city of Donetsk.
Nearly a million people have fled their homes, according to the United Nations, while another 600,000 have taken refuge in neighbouring countries.