Archbishop Silvano Tomasi, the Holy See's representative at the United Nations, said if no political solution was found then military action would have to be taken.
"What's needed is a co-ordinated and well-thought-out coalition to do everything possible to achieve a political settlement without violence.
"But if that's not possible, then the use of force will be necessary," he said.
Islamic State has been taking over large parts of Iraq and Syria forcing tens of thousands of Christians to flee their homes.
The group recently beheaded 21 Coptic Christians in Libya and last month abducted hundreds of believers from a Syrian village.
The Vatican has always opposed military action in the Middle East and this is seen as its first firm approval of the use of force.
Archbishop Tomasi said the jihadis were committing "genocide" against Christians and had to be stopped.
Speaking to US Catholic website Crux he added: "We have to stop this kind of genocide. Otherwise we'll be crying out in the future about why we didn't so something, why we allowed such a terrible tragedy to happen."
He said Christians were the main focus of attacks from Islamic State but added that any intervention in the region must provide support for all minorities.
Any military action must be led by the United Nations, he stressed.