The Arizona senator, in a speech to the powerful US-Israel lobby, also said his potential Democratic opponent Barack Obama's offer to hold presidential-level talks with Tehran was a "serious misreading of history."
McCain's warning came hours after Iranian President Mahmoud Ahmadinejad fired off a new round of fiery rhetoric, saying he was convinced Israel would soon disappear.
The Arizona senator, who drew a standing ovation from the American-Israel Public Affairs Committee's (AIPAC) annual policy conference, said Iran's "continued pursuit of nuclear weapons poses an unacceptable risk, a danger we cannot allow."
"Rather than sitting down unconditionally with the Iranian president or supreme leader in the hope we can talk some sense into them, we must create the real-world pressures that will peacefully, effectively change the path they are on."
McCain called for new international sanctions against Iran, in addition to current United Nations and unilateral measures.
Iran would face curbs on its capacity to import refined gasoline, sanctions on the Bank of Iran and worldwide visa bans and asset freezes which McCain said would cause a rethink by Iranian supreme leader Ali Khamenei and Ahmadinejad.
"A severe limit on Iranian imports of gasoline would create immediate pressure on Khamenei and Ahmadinejad to change course and to cease in the pursuit of nuclear weapons," McCain said.
Iran denies it is seeking nuclear weapons, saying it wants to produce energy for peaceful purposes.
McCain also hit out at Obama, due to address the conference on Wednesday, trying to paint him as naive in world affairs over his offer to hold talks with top Iranian leaders.
"The idea that they now seek nuclear weapons because we refuse to engage in presidential-level talks is a serious misreading of history," McCain said.
"It's hard to see what such a summit with President Ahmadinejad would actually gain, except an earful of anti-Semitic rants, and a worldwide audience for a man who denies one Holocaust and talks before frenzied crowds about starting another."
The Obama campaign accused McCain of wanting to continue President George W. Bush's policies in the Middle East, which the Democrat says have only strengthened Iran.
"John McCain stubbornly insists on continuing a dangerous and failed foreign policy that has clearly made the United States and Israel less secure," Obama spokesman Hari Sevugan said.
"The United States and Israel cannot afford four more years of an unwillingness to change course."
Earlier, Ahmadinejad launched a new attack against Israel and its US ally.
"I must announce that the Zionist regime (Israel), with a 60-year record of genocide, plunder, invasion and betrayal, is about to die and will soon be erased from the geographical scene," Ahmadinejad said.
A Gallup poll Monday bolstered Obama's position, finding that two-thirds of Americans think it's a good idea for the US president to meet leaders of enemy countries, and 59 percent would back talks with the Iranian president.
McCain also hammered Obama on Iraq, seizing on US and Iraqi reports of the lowest monthly death toll in the country since the US-led invasion in 2003, to decry those still fighting over "yesterday's" options.
"It's worth recalling that America's progress in Iraq is the direct result of the new strategy that Senator Obama opposed," said McCain, a strong backer of the troop surge plan introduced last year.
McCain said Obama's plan for a gradual withdrawal of US combat troops from Iraq would cause a "catastrophe."
But Obama, campaigning in Michigan, accused McCain of trying to deflect attention from domestic issues.
"It seems like all Senator McCain is talking about on the campaign trail is Iraq — instead of offering real solutions to the problems you face every day," he told supporters.
"In fact, Senator McCain conceded not long ago that he didn't know much about the economy, that's not his interest, it's not his priority, but it will be mine."
