In addition, the military would be likely to impose a hiring freeze and review its contracts, in some cases declining options to extend them, said Army Lt. Col. Elizabeth Robbins, a Pentagon spokeswoman.
Panetta and other senior defense leaders called key lawmakers over the past two days warning that "over 800,000 civilian employees could face furloughs relatively soon should sequestration occur," the defense official said. "That's not something that anyone wants to see happen."
Panetta told Pentagon employees in a memo issued Dec. 20 that military personnel rosters would not be affected by sequestration during fiscal 2013, noting that the White House has said it would use its authority to protect the force in the short term. Civilian employees would be vulnerable to furloughs, a type of unpaid leave, however.
"Let me assure you that we will carefully examine other options to reduce costs within the agency before taking such action," he wrote.
Michael O'Hanlon, a defense-spending expert at the Brookings Institution, said that after the deadline expires, incoming lawmakers could hammer out an agreement over the next two months to allocate funding to federal agencies.
If sequestration occurs, he said, the Obama administration would have to either downscale its mid- and long-term defense strategic planning or take a fresh look at what it can realistically accomplish with substantially less money.
"There are some things that are risky but not necessarily incompatible with the thrust of our foreign policy," O'Hanlon said Monday, citing as examples modest trims in forces and slight increases in health-care premiums.
A more dramatic approach, he said, could entail cutting the Army by 25 percent, which would leave enough ground troops for a major war but not two concurrent conflicts, or slashing pay for uniformed personnel by thousands of dollars.
Lisa Rein contributed to this report.