President Barack Obama's warning last week that Iran's leaders would suffer "growing consequences" if they ignored international obligations meant tough sanctions were in the offing, Gates told the House Armed Services Committee.
"I think in the near term it's more likely to be severe sanctions imposed partly by the UN Security Council and partly by the United States and like-minded countries," Gates said when asked about Obama's warning.
He did not specify what financial or other penalties might be imposed on Tehran.
The US Senate has called for imposing sanctions that would target its thirst for petrol imports, punishing non-Iranian firms that do business in Iran's energy sector or help the country produce or import refined oil products.
The Obama administration has so far resisted the proposal.
Gates's comments came as the administration reacted cautiously Wednesday to an apparent U-turn by Iran on a UN-brokered deal aimed at defusing international concerns over its nuclear ambitions.
President Mahmoud Ahmadinejad said late Tuesday that Iran was willing to send its uranium abroad in exchange for processed nuclear fuel — seemingly accepting a deal put forward by nations who fear Tehran is trying to develop nuclear weapons.
Iran would have "no problem" sending out its stocks of low-enriched uranium (LEU) to be further purified into reactor fuel for use at a research facility, Ahmadinejad said in a television interview.
Iran needs nuclear fuel to power its UN-monitored reactor but the West fears its uranium enrichment program is masking efforts to produce atomic weapons — claims vehemently denied by the Islamic republic.
Gates was also asked by lawmakers about US military contingency plans to "prevent" Iran from securing nuclear weapons.
The defense secretary offered to answer the question in a classified, behind-closed-doors hearing, but said: "We are looking at a full-range of options."
He has previously played down the likelihood of US military action against Iran, saying it would only "buy time" and that international pressure and diplomacy was a more promising approach.
Obama's year-old offer of engagement has failed to persuade Iran to freeze its uranium enrichment program, which could be used to build a nuclear arsenal.
