George Osborne has warned Greece that backing a bailout is "crucial" as European leaders prepared to hold emergency talks about the unravelling rescue deal.
The decision to stage a referendum on the package has already sent shockwaves through international financial markets and the country's government was on the brink of political collapse as the ruling party tore itself apart over the move.
The Chancellor warned that the global recovery depended on the agreement going through.
German chancellor Angela Merkel and French president Nicolas Sarkozy will meet the IMF and Greek prime minister George Papandreou to thrash out ways to stem the turmoil.
Downing Street confirmed the UK would be involved in discussions in the "margins" of the G20, which starts on Thursday, about the eurozone package agreed last week. A spokesman said implementing the deal agreed at the Brussels summit would require "further conversations".
Mr Papandreou stunned the markets on Monday night with a surprise announcement that he intended to put the deal hammered out by EU leaders in Brussels, which would impose a harsh austerity programme on the country, to a referendum.
The move was unanimously backed by his cabinet during the early hours of Wednesday morning following a seven-hour meeting, with a government spokesman announcing the vote had the "total support" of ministers and would be held "as soon as possible".
Fears a "no" vote could trigger a disorderly default by Greece on its debts sparked a slump globally, with the FTSE 100 Index in London falling more than 2%, or 122.7 points, to 5421.6. There were even bigger losses on the European markets, where the Cac-40 in Paris and the Dax in Frankfurt were down 5%. On Wall Street the Dow Jones closed nearly 300 points lower.
Mr Papandreou's surprise move - which Downing Street learned of from media reports - prompted one Greek MP to quit, leaving the ruling Pasok party with a majority of just two.
Mr Osborne said there was "no doubt that the decision of the Greek prime minister has added to the instability and uncertainty in the eurozone".