Mr. Kerry, speaking in a joint news conference with Ukrainian Foreign Minister Pavlo Klimkin, said Russia has left the world "with no choice" but to impose further sanctions.
The move is the most significant political step yet taken by the EU against Russia since Moscow's annexation of Crimea in March.
The EU has so far targeted dozens of Russian and pro-Russian separatists in Ukraine with an asset freeze and travel ban as well as hitting some Crimea-based companies. The bloc also has frozen fresh financing for some EU projects in Russia. On Monday, in a move aimed at hitting people and companies with close ties to the Kremlin, the EU also said it would target people who have been actively supporting the Russian government's actions in Ukraine.
Mr. Kerry said he spoke with Russian Foreign Minister Sergei Lavrov on Tuesday morning to demand that Russian President Vladimir Putin wield influence on Russian-backed separatists to lay down their arms to avoid deeper isolation. While Russia has said it hopes to help de-escalate the situation in Ukraine, Mr. Kerry said Russia's actions haven't shown "a shred of evidence" that Russia has a legitimate desire to do so.
Mr. Klimkin said reaching a cease-fire with the rebels would be "vital" and must be bilateral. Mr. Kerry repeated U.S. charges that evidence proves Russia has fired at Ukrainian armed forces, and Mr. Klimkin denied reports that Ukrainians had fired back at Russia.