The UN chief was reporting to the 15-member council following his visit to Saudi Arabia and the United Arab Emirates for talks that he said focussed on "preventing civil war in Yemen."
"Let me be clear: Yemen is collapsing before our eyes. We cannot stand by and watch," Ban told the council.
He called for President Abedrabbo Mansour Hadi and his prime minister to be "granted freedom of movement" following the power grab by the Shiite militia known as the Huthis which has left them under de facto house arrest.
Ban at the weekend called for Hadi to be fully restored as president, following talks with King Salman in Saudi Arabia, which has described the Huthi power grab as a coup.
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Yemen, a key US ally in the fight against Al-Qaeda, has been in turmoil since the Huthis seized Sanaa in September and ousted the government last week.
"Today, Yemen is at a crossroad: either the country will descend into civil war and disintegration, or the country will find a way to put the transition back on track," UN special envoy for Yemen Jamal Benomar told the council by video link from Sanaa.
Benomar has been leading UN efforts to broker a deal that would push the Huthis to step back from their power grab and restore some measure of stability in the impoverished Arab country.
The United States, Britain and France on Wednesday rushed to close their embassies over security fears, with US staff destroying top-secret documents and sensitive equipment before pulling out.
The Security Council last week threatened to "take further steps" if negotiations to end the crisis failed, in a veiled reference to possible sanctions.