Kerry, who was testifying Tuesday before a Senate panel, said pro-Russia demonstrators at regional government headquarters in Kharkiv and the Donetsk regional administration was a contrived pretext for military intervention.
"These efforts are as ham-handed as they are transparent, and quite simply what we see from Russia is illegal and illegitimate effort to destabilize a sovereign state and create a contrived crisis," Kerry said. "Russia's clear and unmistakable involvement in destabilizing and engaging in separatists activities in Ukraine is deeply disturbing."
Eastern Ukraine has become increasingly unstable in recent days as pro-Russian activists took over government buildings and declared the region independent. The activists are calling for a secession of the region, which could lead to a repeat of events in the Crimean peninsula last month.
Kerry said the U.S. and European allies were united and willing to impose tough new penalties on Russian energy, banking and mining if Moscow fails to honor a sovereign Ukraine.
Kerry said he would meet next week in Europe with Russia Foreign Minister Sergey Lavrov and Ukrainian officials. He urged Russia to choose a diplomatic path forward.
"Russia has a choice: to work with the international community to help build an independent Ukraine that could be a bridge between the east and west, not a tug of war...or they could face greater isolation and pay the cost for their failure to see that the world is not a zero sum game," Kerry said.