The US secretary of state, Mike Pompeo, welcomed Andrew Brunson's release from prison - but said the decision did not go far enough. "Rule of law is for everyone; no exception", Foreign Minister Mevlut Cavusoglu tweeted.
"No one dictates to Turkey". Still, Thursday's threat of sanctions marks a distinct escalation in rhetoric that coincides with a broader cooling in the US-Turkey relationship.
Brunson was released from prison on Wednesday and placed on house arrest, and forbidden to leave Turkey. The 50-year-old who has led a tiny congregation in Izmir for the past 23 years is being tried on thinly evidenced espionage and terror charges.
Trump's ambassador for International Religious Freedom, Sam Brownback, said Brunson's detention had been raised with Turkey's leadership for some months, and while his transfer to house arrest was an improvement, "he is not free".
The United States and Turkey are both members of North Atlantic Treaty Organisation.
Last week, a Turkish court rejected appeals from US officials to release Brunson.
"In China, a large number of Uighur Muslims are being sent to re-education camps, Tibetan Buddhists face significant restrictions in organizing their own faith and Christian house church leaders are imprisoned".
The pastor denies the charges and his defense team argues the case is built on questionable witness statements that should never have been brought to court.
Secretary of State Mike Pompeo was blindsided by threats against North Atlantic Treaty Organisation ally Turkey made Thursday by President Trump and Vice President Mike Pence, two State Department sources told NBC News.
Last September, Erdogan suggested that Turkey could free Brunson if Washington handed over Gulen, who lives in self-imposed exile in Pennsylvania - an offer brushed off by Washington. The United States has not granted Turkey's extradition requests.
Brunson's detention has deepened a rift between Washington and Ankara, which are also at odds over the Syrian war and Turkey's plan to buy missile defenses from Russian Federation. A USA judge sentenced a Turkish bank executive in May to 32 months in prison for helping Iran evade US sanctions, while two locally employed USA consulate staff in Turkey have been detained.
He spoke at the close of a three-day conference on religious freedom.
At the end of a recent hearing, the court inside a prison complex in the town of Aliaga in western Turkey rejected Brunson's lawyer's request that he be freed pending the outcome of the trial. The pastor has denied being involved in anti-government activities, as Turkish authorities alleged.
Trump has spoken about Brunson already this year, bringing up his case in May during a ceremony to mark the release of an American held by Venezuela's government.