Fallon: Russia 'danger' to Latvia, Lithuania and Estonia
Michael Fallon said he was worried about "pressure" from Russian President Vladimir Putin on the ex-Soviet states, which are Nato members.
Russia might use tactics there similar to those it used in Ukraine, he said.
Mr Fallon said Nato must be ready for aggression from Russia "in whatever form it takes".
"Nato is getting ready," he added.
His comments came after Prime Minister David Cameron called on Europe to tell Russia it faced economic and financial consequences for "many years to come" if it did not stop destabilising Ukraine.
'Warming up'
Speaking to journalists from the Times and Daily Telegraph during a flight to Sierra Leone, where British troops are helping tackle the Ebola outbreak, Mr Fallon said: "I'm worried about Putin.
"I'm worried about his pressure on the Baltics, the way he is testing Nato."
He said Russia was likely to use covert tactics like those he said it used to annex Crimea and in the current Ukraine conflict.
Russia has denied helping pro-Russian separatists, but it has been repeatedly accused of sending weapons and troops and using propaganda to inflame tensions.Eleanor Garnier
BBC political correspondent
The warning the Defence Secretary has made in the Times and Telegraph is clear. Baltic States like Latvia, Lithuania and Estonia could be next in a targeted campaign backed by Russia.
Earlier this month it was revealed the UK would play a lead role in a new Nato rapid reaction force that would include 1,000 British soldiers.
It was a move designed to deter a perceived Russian threat and reassure the Baltic States.
This tough language from Mr Fallon underlines a concern that Russia's seizure of the Crimea and the recent fighting in Ukraine are more than just a temporary crisis between Russia and the West.
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Mr Fallon said the situation was not a new Cold War - and was "pretty warm" already.
"You have tanks and armour rolling across the Ukrainian border and you have an Estonian border guard being captured and not yet still returned," he said.
"When you have jets being flown up the English Channel, when you have submarines in the North Sea, it looks to me like it's warming up."
Mr Cameron said: "Those Russian-backed rebels in eastern Ukraine, they are using Russian rocket launchers, Russian tanks, Russian artillery.
"You can't buy this equipment on eBay, it hasn't come from somewhere else, it's come from Russia and we know that.
"So we have to be very firm and strong about the sanctions and say to Vladimir Putin 'what you are doing is unacceptable and it will have economic and financial consequences for many years to come if you do not desist with your behaviour'."
One of the principles of Nato, which is made up of 26 European countries as well as the US and Canada, is that an "attack against one or several members is considered as an attack against all".
Adam Swain, from the University of Nottingham, said he found it "difficult to imagine" that President Putin would launch "overt aggression" against the Baltic countries because he could expect a "severe response".
He said: "We had the Minsk agreement last week, it doesn't appear to be working… it means that politicians like the defence secretary are responding through rhetoric rather than through real action."
The UK Joint Delegation to Nato tweeted that Russia had deployed the country's "most advanced anti-aircraft artillery system" in Ukraine.
