The US is at risk of a "cyber-Pearl Harbour" attack from overseas hackers and needs to take precautions against such threats.
Government systems, financial networks, transport and the national power grid are all potential targets for foreign cyber-criminals, Defense Secretary Leon Panetta told an audience at the New York Intrepid Sea, Air and Space Museum.
"An aggressor nation or extremist group could use these kinds of cyber tools to gain control of critical switches," said Panetta, who suggested the biggest threats come from Chinese, Iranian and Russian military groups.
"They could derail passenger trains, or even more dangerous, derail trains loaded with lethal chemicals. They could contaminate the water supply in major cities, or shut down the power grid across large parts of the country."
Panetta's comments come after a spike in cyber attacks on US institutions.
He told the audience that the attacks seen so far will seem insignificant compared to what might come in the future, which could see "cyber-actors launching several attacks on our critical infrastructure at one time, in combination with a physical attack".
The Defence Secretary said such an attack would be a "cyber-Pearl Harbour that would cause physical destruction and the loss of life, an attack that would paralyse and shock the nation and create a profound new sense of vulnerability".
Referring to the situation as a "pre-9/11 moment", Panetta argued that the US government must legislate to protect against these large-scale hack attempts.
"The fact is that to fully provide the necessary protection in our democracy, cybersecurity must be passed by the Congress," he said, adding that "without it, we are and we will be vulnerable."
Panetta added that the US Defense Department has developed tools to track hackers and that the country is prepared to act against potential threats.
"If we detect an imminent threat of attack that will cause significant physical destruction or kill American citizens, we need to have the option to take action to defend the nation, when directed by the President," he said.
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A discussion of the "risk perception gap", its implications and how it can be closed