The council also said it supported Secretary-General Boutros Boutros-Ghali's proposal to increase the observer force from 10 to 35 members.
"Continued support of the international community for the peace process in Liberia ... is contingent on the Liberian factions' demonstrating their commitment to resolve their differences peacefully," a Security Council resolution said.
Faction leaders agreed earlier this month to a cease-fire and to prepare for elections, but previous agreements have repeatedly collapsed. The country's seven-year-old civil war has killed about 150,000 people.
"The international community's patience is not unlimited," said Chilean Ambassador Leonel Searle.
The military observers assist human rights groups and support humanitarian activities. Western African nations have an 8,500-member peacekeeping force in Liberia.