The UN Security Council raised the prospect of possible sanctions on Friday as Yemen's Shiite Huthi militia sought to tighten their grip on the country.
Security Council President Liu Jieyi said the body's 15 members were ready to "to take further steps" if negotiations to halt the unrest were not resumed "immediately."
The council "called in the strongest terms for all parties, in particular the Huthis, to abide by the GCC initiative and the national dialogue conference," a statement said, referring to an initiative brokered by the Gulf Cooperation Council aimed at solving Yemen's political crisis.
The Security Council called for the immediate release of President Abdrabuh Mansur Hadi and members of his government from house arrest.
Huthi militia dissolved parliament and created a "presidential council" to fill a power vacuum, a move condemned both at home and abroad.
The militia, which controls Sanaa, said it would set up a 551-member national council to replace the legislature in the violence-wracked country, a key US ally in the fight against Al-Qaeda.
The heavily-armed Huthis swept into Sanaa from their northern stronghold in September.
Last month, they seized the presidential palace and key government buildings in what authorities called a coup attempt.
Yemen, a key ally in US counterterrorism efforts, has been riven by instability since the Arab Spring-inspired uprising that forced autocratic president Ali Abdullah Saleh from power in 2012.