Officials warned that the threat to life and property was "unprecedented" and ordered hundreds of thousands of residents in cities and towns from New England to North Carolina to evacuate their homes and seek shelter.
The storm, a deadly combination of a tropical hurricane rolling north from the Caribbean and fierce wintry winds approaching from Canada, was expected to leave tens of millions without power, and trigger coastal and river flooding.
Amtrak trains up and down the coast were cancelled until Wednesday and tens of thousands of travelers were marooned in airports, with flights grounded.
"The most important message to the public I have right now, is 'please listen to what your state and local officials are saying.' When they tell you to evacuate, you need to evacuate," President Barack Obama said.
The New York Stock Exchange, the Nasdaq and the futures markets in Chicago were closed on Monday, some of the world's richest cities were effectively shut for business and the US election campaign was severely disrupted.
The category one hurricane, which has already killed at least 66 people in the Caribbean, is expected to make landfall near the evacuated gambling haven of Atlantic City, New Jersey in the early evening (at or around 2200 GMT).
Streets leading up to the city's famed ocean-front boardwalk were flooded, and mostly deserted as the city braced for high tide. In nearby Ocean City, a section of promenade was smashed and fell into the storm surge.
Forecasters, however, have warned that the storm's effects could extend all the way from North Carolina to New England. Parts of New York and Boston were subject to evacuation orders, and Washington was rain-swept and deserted.
As it approached, Sandy's maximum sustained winds strengthened to 90 miles (150 kilometers) per hour from 75 mph in the morning and at 1800 GMT its eye was located 110 miles southeast of Atlantic City.
"The center of Sandy is expected to make landfall along or just south of the southern New Jersey coast by early evening," the National Hurricane Center said.
With just eight days until polling day, Obama canceled an appearance in the swing state of Florida, returning to the White House to steer the relief effort while citizens and watched the weather on live webcams.
"The election will take care of itself next week," Obama said. "Right now, our number one priority is to make sure that we are saving lives ... and that we respond as quickly as possible to get the economy back on track."
Both the Democrat incumbent and his Republican rival Mitt Romney were keen to stay on top of public sentiment regarding the storm, given the memory of Hurricane Katrina in 2005. Romney also cancelled some appearances.
Former president George W. Bush was widely seen as having bungled the handling of Katrina, which devastated New Orleans. The failure of authorities in the ensuing emergency response tainted the rest of his presidency.
Although Sandy lacks the sheer force of Katrina, it has a broader front and will combine with cold weather bearing down from Canada to wreak havoc in a climatic confluence of events dubbed a "Perfect Storm".
Obama has already signed emergency declarations to free up federal disaster funds for New York state, Massachusetts, Connecticut, Maryland, the District of Columbia, New Jersey, Pennsylvania and Rhode Island.
"There will undoubtedly be some deaths," Maryland governor Martin O'Malley told reporters, citing the intensity of the storm and likely floods caused by the tidal surge and high waves.
Forecasters warned that New York Harbor and the Long Island Sound could see seawater surges of up to 11 feet (more than three meters) above normal levels, coinciding with high tides due to the full moon.
But many residents at Rockaway Beach, in the New York borough of Queens, refused to bow to official demands that they stay home. Some walked their dogs and others took photos of waves sending water across the beach boardwalk.
Around 1,900 members of the National Guard have been activated and around 60,000 more are on standby, the Pentagon said, with 140 helicopters being made available in anticipation of rescue and relief efforts.
The storm caused disaster at sea when the 16-person crew of a replica of the HMS Bounty, the three-mast vessel on which a famous mutiny took place in 1789, was forced to abandon ship after it started to take on water.
The sailors donned cold-water survival suits and life jackets before launching in two 25-man lifeboats with canopies after getting caught up in stormy waters 90 miles southeast of Hatteras, North Carolina.
Fourteen crew members were hoisted to safety but two were still missing, the coast guard said.