The use of force by Russia in Ukraine would be a choice of last resort, Putin said, and sanctions being considered against Moscow by the West would be counter-productive. (Agencies)
Putin told a news conference at his state residence outside Moscow that there had been an "unconstitutional coup" in Ukraine and ousted leader Viktor Yanukovich, an ally of Russia, was still the legitimate leader of the country despite giving up all power.
Earlier on Tuesday, Putin ordered troops involved in a military exercise in western Russia, close to the border with Ukraine, back to their bases.
Russian financial markets rebounded after sharp falls on Monday, and the euro and dollar rose in Japan, though Moscow's forces remained in control of Ukraine's Crimea region, seized bloodlessly after Yanukovich was ousted last month.
Russia paid a heavy financial price on Monday for its military intervention in Ukraine, with stocks, bonds and the rouble plunging as Putin's forces tightened their grip in Crimea, whose population is mainly ethnic Russian.
The Moscow stock market fell more than 10 percent on Monday, wiping nearly $60 billion off the value of Russian firms but Russian stock indexes rose more than four percent early on Tuesday before slipping back again slightly, though still up on the day.
Putin said the turmoil in Russian markets was a "tactical, temporary" decision by investors.
U.S. Secretary of State John Kerry will propose ways for a negotiation between Russia and Ukraine to be overseen by a multilateral organisation when he visits Kiev on Tuesday.
NATO allies will hold emergency talks on the crisis on Tuesday, for the second time in three days.
The use of force by Russia in Ukraine would be a choice of last resort, Putin said, and sanctions being considered against Moscow by the West would be counter-productive.