Russia is a key player in mediations on Iran's nuclear program, which the United States and other Western nations believe is geared toward producing atomic weapons. Iran insists its nuclear technology has a solely peaceful purpose, but the West is frustrated by Iran's perceived reluctance to prove that.
Medvedev said in a statement to members of the League of Arab States in Moscow that "we are convinced that the sanctions path is not optimal."
"At the same time, developments along this scenario can't be excluded," the statement said.
Mixed signals on the controversial issue continue to emanate from Moscow, with some officials highlighting the importance of a diplomatic solution to the stalemate while others suggest sanctions may now be the only way to prevent Iran joining the nuclear club.
Russia is a longtime trade partner of Iran, giving it more leverage than Western nations
- and perhaps more patience.
But Foreign Minister Sergey Lavrov said last week that Iran was allowing an opportunity for mutually beneficial dialogue with the West to "slip away."
Russia and the United States - the world's premier nuclear superpowers - on Friday struck a landmark agreement cutting their nuclear arsenals by a third. Both view a nuclear-armed Iran
- whose leaders have said Israel should be wiped off the map - as a destabilizing factor in the Middle East and the wider world. Washington and Moscow have both hailed diplomacy over sanctions as the favored solution.