Asked whether Britain would support an Israeli strike against Iran, Miliband said in a BBC radio interview: "We don't want to get there… We are 100 percent focused on the diplomatic track."
"It's a diplomatic resolution that must be found to this issue. It's massively in everybody's interest," he said.
But he added: "This is a very, very dangerous situation. It's one that can be resolved by diplomacy but the costs of the Iranian course need to be made very, very clear."
The West accuses Iran of seeking to develop nuclear weapons under cover of a civilian programme. Iran, the world's fourth largest oil producer, denies the charge.
Western powers gave Iran two weeks from July 19 to respond to their offer to hold off on imposing more U.N. sanctions on Iran if Tehran would freeze any expansion of its nuclear work.
But Iran's Supreme Leader Ayatollah Ali Khamenei said on Wednesday Iran would press ahead with its nuclear path.
Also on Wednesday, Israeli Defence Minister Ehud Barak said tough sanctions should be used to prevent Iran from developing nuclear weapons but added that no options should be excluded.
There has been increasing speculation that either the United States or Israel could attack Iran's nuclear facilities, though both have said force should be a last resort.
