The Prime Minister said that aggression in separatist-held areas in the east of Ukraine had the potential be a "prelude to bigger action", with the West fearing a so-called "false flag" operation that could give Moscow cover to wage war on Kyiv.
Mr Johnson made the comments to broadcasters following his speech to the Munich Security Conference, where he is meeting world leaders to discuss the tension in eastern Europe.
He told the annual summit on Saturday that the West would "witness the destruction of a democratic state" if President Vladimir Putin sends Russian troops across the border unto Ukraine, as he pushed for allies to adopt a united approach in punishing the Kremlin for any military advance.
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Mr Johnson, who visited Kyiv a fortnight ago, warned an incursion by the reported 150,000 Russian troops amassed on the border would spark a "generation of bloodshed and misery", predicting that Ukrainians would fight and kill for the return of their freedom.
He also used his speech to vow to make it "impossible" for Russian oligarchs and companies linked to the Russian state to raise finance in London, as the UK Government looks to hit the Kremlin's pocket.
The sounding of the alarm in Germany comes after US President Joe Biden said Washington has reason to believe Russian forces "intend to attack" Ukraine in the coming days, including targeting the capital Kyiv - a city with a population of 2.8 million people.
Mr Biden told a White House press briefing he is "convinced" Mr Putin has "made the decision" to move his military across the border, having spent weeks saying he thought the Russian leader was undecided.
The Prime Minister, asked by broadcasters whether he agreed with the US assessment, said: "I think certainly things are in motion, but the question is whether it can all be pulled back, and whether the president of Russia is still able to call this operation off.
"I think that possibility must logically still exist, and therefore I think it's absolutely vital that we have a path of dialogue, of reason."
There is anxiety in the West that mounting instability in the Donbas region in Ukraine's east, where government forces have been fighting pro-Russia rebels since 2014 in a conflict that has killed some 14,000 people, could spiral into a wider battle.
Denis Pushilin, the head of the pro-Russian separatist government in the Donetsk region, announced on Saturday a full troop mobilisation and urged reservists to show up at military enlistment offices - a move quickly echoed by separatists in the Luhansk region.
Ukraine's military said shelling killed a soldier early on Saturday in a government-held part of the Donetsk region and that separatist forces were placing artillery in residential areas to try to provoke a response.
Mr Johnson said the activity in the Donbas was the "kind of provocations that the Russians engage in generally".
"And I'm afraid that this could well be the prelude to bigger action," he added.
It comes as aggression towards Ukraine heated up, with top Ukrainian military officials coming under shelling attack during a tour of the conflict front, forcing them to flee to a bomb shelter.
As well as a call to arms by Moscow-backed rebels, a mass evacuation of women, children and the elderly to Russia from the separatist-held territories in the Donetsk and Luhansk region is under way, with some commentators speculating the move is part of Moscow's efforts to paint Ukraine as the aggressor.
Meanwhile, while the West is using the Munich summit to send a message to Moscow, Mr Putin was scheduled to watch Russian forces flex their military muscle during massive nuclear drills.
He has pledged to protect Russia's national interests against what he sees as encroaching Western threats.
The Prime Minister said Mr Putin only had himself to blame for Nato forces being deployed to the alliance's eastern flank and closer to Russia's border, citing the "tension that he has created".
But he told reporters that "if there's sort of a path for diplomacy, for negotiation, then let's go down it" with Mr Putin.
"I think there's still time for wise counsel, still time for common sense to win," Mr Johnson said.
"We hope that President Putin will think better of what I think will be an absolutely crazy, disastrous venture in Ukraine."
While in Munich, the British leader met German chancellor Olaf Scholz, Ukrainian president Volodymyr Zelenskyy - to whom he offered the UK's "unequivocal support" - and the leaders of Latvia and Estonia.
Sir Keir Starmer said the Labour Party "supports the actions the UK Government is taking" in aiming to bring about a "peaceful end" to the current tension.
"We stand resolutely as one in ensuring the right of all democratic states to determine their own path to prosperity without fear or threat," the party leader said.
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