A week ago Putin ordered his military command to put Russia's deterrence forces - which include nuclear arms - on high alert, citing what he called aggressive statements by NATO leaders and Western economic sanctions against Moscow.
On Sunday, Russian media reported Ukraine was close to building a plutonium-based "dirty bomb" nuclear weapon, citing an unidentified source and giving no evidence. Read full story
"I think its rhetoric and brinkmanship," Raab told Sky News when asked about a possible nuclear escalation by the Kremlin.
"(Putin's) got a track record as long as anyone's arm of misinformation and propaganda ... this is a distraction from what the real issues are at hand - which is that it's an illegal invasion and it is not going according to plan," Raab said.
He warned the conflict could last for months, if not years, and when asked whether a temporary ceasefire in parts of Ukraine would hold, said he was sceptical about Russian promises.
Moscow calls its actions a "special military operation. It says it wants to "demilitarise" and "denazify" its pro-Western neighbour and prevent Kyiv from joining NATO.
Britain's Chief of Defence Staff stressed that the UK had its own defences and urged a calm response to any talk of nuclear weapons.
"We need to be very clear and we need to be calm and responsible and not react to threats from President Putin," Tony Radakin, who is head of Britain's armed forces, told reporters.
"There's an imperative that it doesn't escalate even in conventional terms, and it would be insane for this to start a path towards a nuclear escalation."
Raab rejected Putin's statement from Saturday that likened the West's sanction's to a declaration of war.
"Sanctions are not an act of war, international law is very clear about that," he said. "Our sanctions are entirely both legally justified, but also proportionate to what we're trying to deal with."
Raab also called on China and India to help increase diplomatic pressure on Russia.
"China has got a job here. They've got to step up as well - this is a permanent member of Security Council - and India as well. We need to expand the diplomatic pressure," Raab said.