The move would deliver "another crushing below" to Russia as it continues its aggression in Ukraine, Biden said.
President Vladimir Putin is an "aggressor, the aggressor," Biden said and that he must "pay a price".
He also said the United States would add new names to a list of Russian oligarchs who are sanctioned and ban the export of luxury goods to Russia.
In a separate statement, the White House said Biden would ban US investment in Russia beyond the energy sector and that the G7 would move to block Russia from funds from the International Monetary Fund and World Bank.
"Those are the latest steps we're taking but they're not the last steps we're taking." Biden said.
Russia calls its actions in Ukraine a "special operation".
The coordinated moves by the US, UK and other allies come on top of a host of unprecedented sanctions, export controls and banking restrictions aimed at pressuring Putin to end the war in Ukraine.
The moves have already caused the Russian economy to crater and the IMF is now predicting that it will plunge into a "deep recession" this year.
The United States is expanding sanctions on Russia to include executives of sanctioned banks and Russian banker Yuri Kovalchuk as well as Russian lawmakers.
"Russia cannot grossly violate international law and expect to benefit from being part of the international economic order," the White House said in a statement.
Stripping Russia of its favoured nation status paves the way for the United States and its allies to impose tariffs on a wide range of Russian goods, which would further ratchet up pressure on the economy.
Russia is among the world's top exporters of oil, natural gas, copper, aluminium, palladium and other important commodities, and accounted for 1.9 per cent of global trade in 2020.
In the United States, removing Russia's "Permanent Normal Trade Relations" status will require an act of Congress, but lawmakers in both houses - and on both sides of the political aisle - have already signalled their support.
The White House will work with lawmakers on legislation to revoke Russia's status, administration sources said.
