Islamist militants stormed the US Embassy in Tehran on November 4, 1979, and seized its occupants.
Fifty-two Americans were held hostage for 444 days.
Carter said Monday that one proposed option was a military strike on Iran, but he chose to stick with negotiations to prevent bloodshed and bring the hostages home safely.
"My main advisers insisted that I should attack Iran," he told reporters in the northern Thai city of Chiang Mai, where he was helping build houses for Habitat for Humanity.
"I could have destroyed Iran with my weaponry. But I felt in the process it was likely the hostages' lives would be lost, and I didn't want to kill 20,000 Iranians. So I didn't attack."
The hostages were released on January 20, 1981, just minutes after the swearing in of President Ronald Reagan, whose victory over Carter is largely attributed to the crisis.
The former president has commented in the past on how military action had been an option but that he feared a death toll in the tens of thousands, according to Carter spokeswoman Deanna Congileo.