"Military intervention would not be appropriate to reaching a peaceful settlement in Libya," Hammond said at a joint press conference in Algiers with his Algerian counterpart, Ramtane Lamamra.
"Efforts to empower Libya to install a national unity government will help its struggle against terrorism and prevent the [Islamic State of Iraq and Levant] terrorist group from gaining a foothold in Libya," Hammond added.
Lamamra, for his part, said his country believed a political solution in Libya would be more effective than a military one.
Libya remains locked in a months-long struggle between rival camps, a state of affairs that has yielded two rival seats of governments in Tripoli and Tobruk respectively.
On Monday, the Egyptian army carried out airstrikes against ISIL targets in eastern Libya's Darnah city. The strikes came shortly after the militant group released a video showing the execution of 21 Egyptian hostages in Libya.
At a Wednesday meeting of the UN Security Council, Egypt – which only recognizes Libya's Tobruk-based government – called on the UN to lift a ban on international arms sales to the North African country.