The report acknowledged that the armed unmanned aircraft are a useful tool in the U.S. counterterrorism arsenal and are "here to stay," but it called on President Barack Obama to allow increased public scrutiny and tighter oversight for the secretive program while developing international norms.
"We are concerned that the administration's heavy reliance on targeted killings as a pillar of U.S. counterterrorism strategy rests on questionable assumptions and risks increasing instability and escalating conflicts," said the independent panel, which was sponsored by the Stimson Center think tank.
The report by the 10-member task force, including former high-ranking State Department and Pentagon officials, comes as the United States considers drone strikes in support of beleaguered Iraqi government forces fighting Sunni insurgents who have taken over a large swathe of northern Iraq.
It concluded that "while tactical strikes may have helped keep the homeland free of major terrorist attacks," this has come at a cost of "blowback" for Washington in places like Pakistan and Yemen.
The former officials warned that, given the low-risk, low-cost nature of drone technology, "the increasing use of lethal UAVs (unmanned aerial vehicles) may create a slippery slope leading to continual or wider wars."
U.S. drone use "outside of hot battlefields is likely to be imitated by other states as well," the report said, citing the risk of widening conflicts around the world because of the "dangerous precedent" set by Washington.
Panel co-chair Rosa Brooks, a Georgetown University law professor and former Defense Department adviser, said the United States must take the lead in establishing international standards before "bad guys" acquire and use drone technology.
"If (Russian President) Vladimir Putin were to use drone strikes to take out those he felt were politically inconvenient in eastern Ukraine, for instance, it would be a little tough for us to have an adequate response," she told reporters.
Obama set tighter rules on drone strikes and promised greater transparency in 2013 and repeated that pledge last month. But critics say he has done little to ease secrecy around the targeted-killing program against terrorism suspects.
The panel, also led by retired Army General John Abizaid, former head of U.S. Central Command, urged the administration to conduct a "cost-benefit" analysis of past strikes, acknowledge drone attacks after they have taken place and create an independent commission to review drone policy. It also called on the administration to move ahead with its plan to shift main responsibility for drone strikes from the CIA to the military.
Caitlin Hayden, a spokeswoman for the White House National Security Council, declined comment on the specifics of the report but said the administration would review it.