Biden spoke a day after Iran fired more than 180 ballistic missiles at Israel in a move that he previously described as "ineffective".
Israeli Prime Minister Benjamin Netanyahu vowed that Iran would pay for the attack.
"We'll be discussing with the Israelis what they're going to do but all seven of us (G7 countries) agree that they have a right to respond but they should respond proportionally," Biden told reporters before boarding Air Force One.
Some analysts said Israel's response would likely be sharper than when Iran fired missiles and drones at Israel in April, suggesting this time it could target Iranian nuclear or oil facilities.
Asked whether the US would back any Israeli strike on Iran's nuclear sites, Biden told reporters: "The answer is no."
Biden said more sanctions would be imposed on Iran and that he would speak soon with Netanyahu.
"Obviously, Iran is way off course," he said.
US Deputy Secretary Kurt Campbell said the administration was seeking to align its position with Israel on any response to Iran's attack but also recognises the Middle East is on a "knife's edge" and a broader escalation could imperil both Israeli and US interests.
Speaking at a virtual event hosted by think tank Carnegie Endowment, Campbell repeated the US view that what Iran has undertaken was "deeply irresponsible" and that there must be a "return message".
"I think we tried to underscore our support for some of the actions that Israel has taken," he added.
"We have real wariness about a extended or substantial ground set of operations in Lebanon," Campbell said.
The Israeli army is locked in combat at its northern border with Lebanon's Iran-aligned Hezbollah fighters.
On Wednesday, eight Israeli soldiers were killed -- the deadliest suffered by Israel's military on the Lebanon front in the past year of border-area clashes between Israel and Hezbollah.
Iran said on Wednesday its missile volley - its biggest ever assault on Israel - was over, barring further provocation.
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