The strong comments from the secretary of state, in Asia for his first foray into crisis management, appear to signal a sea change in American policy towards North Korea, AFP reported.
Tillerson's tour comes after a missile launch last week that Pyongyang described as a drill for an attack on US bases in Japan.
The US has 28,000 troops stationed in South Korea to defend it from the North, but the capital Seoul is within range of Pyongyang's artillery and analysts believe any conflict could risk rapid escalation and heavy casualties.
Even so, Tillerson said the United States' "strategic patience" had ended -- the stance of the previous administration under Barack Obama.
"We are exploring a new range of diplomatic, security, economic measures. All options are on the table," Tillerson told reporters at a joint press conference with his South Korean counterpart Yun Byung-Se.
"Certainly we do not want to, for things to get to military conflict," he said. "If they elevate the threat of their weapons program to a level that we believe require action, then, that option's on the table."