In his annual State of the Nation address, Medvedev called for closer cooperation with the United States and the European Union, holding out the prospect of closer ties two decades after the Soviet Union's collapse ended the Cold War.
But he said tension would ratchet up fast, forcing Russia to bolster its military arsenal, if Western offers of cooperation on a system to defend against missile threats failed to produce a concrete agreement.
"In the coming decade we face the following alternatives: either we reach agreement on missile defence and create a full-fledged joint mechanism of cooperation, or [...] a new round of the arms race will begin," Medvedev said.
"And we will have to take a decision about the deployment of new offensive weapons. It is clear that this scenario would be very grave."
The remarks, in a speech of more than an hour to members of parliament and ministers, raised the stakes in sensitive discussions with the United States and NATO on missile defence.
The issue has divided Moscow and the West since the 1980s.
Medvedev agreed to NATO's offer of missile defence cooperation at a summit with the alliance that was hailed as a fresh start, but the plans are sketchy and Russia has warned it wants an equal voice in evaluating threats and responses.
Medvedev has pursued warmer ties with the West and particularly Washington since he was steered into the presidency by his predecessor, Vladimir Putin.
He has embraced US President Barack Obama's efforts to "reset" a relationship that hit post-Cold War lows during Russia's war with Georgia in August 2008, months after he took office.
The warning on missile defence appeared to reflect wariness in the Kremlin amid uncertainty about US Senate ratification of the strategic arms limitation treaty that Medvedev signed with Obama in April, centrepiece of the push for better ties.
Russia has warned that it could withdraw from the treaty if a US missile defence system develops into a threat to Russia's security.
(EurActiv with Reuters.)