In an interview with the German newspaper Die Welt, published after an ally of Angela Merkel criticised the UK for seeking to "blackmail" its partners, Osborne called for change to ensure Britain remains a member of the EU.
His intervention came as the leader of Tory MEPs warned that strident Euroscepticism was in danger of giving the impression of Britain "snarling like a pitbull across the Channel".
In his interview with Die Welt, Osborne said: "I very much hope that Britain remains a member of the EU. But in order that we can remain in the European Union, the EU must change."
The Treasury confirmed that the translation of the interview, which was published in German, was accurate. But a source played down the significance of the chancellor's comments.
"This is consistent with what we have said," a Treasury source said. "We want to remain in the EU but the EU needs to change, and indeed is changing."
The remarks by Osborne were consistent with the approach David Cameron will set out in his long-awaited speech on Europe later this month. The prime minister will say that the current terms of British membership are unacceptable and they must be renegotiated. He is expected to say that a "new settlement", in which powers would be repatriated, should be put to British voters in a referendum.
But the intervention by the chancellor is the clearest signal to date by a minister that Britain may find it has no choice but to leave if acceptable new terms cannot be renegotiated. His remarks follow the warning last month in the Guardian by Lord Kerr of Kinlochard, Britain's former permanent representative to the EU, that the Tory strategy "could lead to our leaving by accident".
The chancellor's interview was published as the leader of Tory MEPs warned of the dangers in the leadership's strategy. Richard Ashworth told a seminar organised by the Business for New Europe group and the European parliament: "We're raising the tempo so that expectations are becoming too great." He warned that Britain was making itself "pretty unattractive and difficult to work with".
Osborne's remarks came a day after the chair of Germany's European affairs committee, Gunther Krichbaum, warned that Britain should not seek to blackmail its EU partners. Krichbaum, a Merkel ally in the CDU party, said: "You cannot create a political future if you are blackmailing other states. That will not help Britain. It needs a Europe that is stable. It needs markets that are functioning."
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