UK Government Culture Secretary Sajid Javid issued the warning as he said more must be done to tackle illegal sites which are infringing copyright.
In a speech to senior music industry figures, Mr Javid said he and Business Secretary Vince Cable had written to leading firms such as Google requesting they work with record firms to find a way of barring sites which violate copyright.
Speaking at the AGM of music trade body BPI, he pointed to figures from Ofcom which showed that in just three months almost 200 million music tracks were "consumed illegally".
Mr Javid said: "No industry - and no Government - can let this level of infringement continue on such a massive, industrial scale. I know some people say the IP genie is out of the bottle and that no amount of wishing will force it back in. But I don't agree with them.
"Copyright infringement is theft, pure and simple."
He went on: "Vince Cable and I have written to Google, Microsoft and Yahoo, asking them to work with you to stop search results sending people to illegal sites.
"And let me be perfectly clear, if we don't see real progress, we will be looking at a legislative approach."
He said the Government, the music industry and technology companies had to work together."We are all connected, we all have a role to play, and we must all work alongside each other to build a fair and legal online economy," he said.
A £3.5 million Government campaign is being launched to persuade UK consumers to use only legal download sites.