The study by retired US marine General James Jones said Iraq's national police force was ineffective and so rife with sectarianism it should be scrapped. (www.bbcnews.com)
The Iraqi military showed signs of progress but would not be able to work independently for some time, he said.
The Jones report is the latest in a series to be considered by the US Congress as it debates the Iraq war.
Earlier this week, a report by a non-partisan Congressional watchdog found the Iraqi government was "dysfunctional" and had failed to meet 11 of 18 benchmarks set by the US.
The top US commander in Iraq, General David Petraeus, and Ryan Crocker, the US ambassador to Iraq, are due to report to Congress next week on the progress of the Bush administration's Iraq strategy.