"The International Occupation Watch Centre" made the announcement on Wednesday as more and more Iraqis complain of harassment and hard-handed policies of the US troops and their British allies.
According to Ted Lewis of non-governmental organisation Global Exchange, the group will investigate and report on abuses such as "illegal detentions, the dismissal of more than 100,000 employees, improper searches and illegal seizures of properties".
Lewis also stressed US and British forces must provide the Iraqis with basic security and services.
The centre has ties to groups spanning the world from the Europe-based World Social Forum, to groups in Southeast Asia, an organisation called "Arabs Resisting Globalisation" and the US-based United for Peace and Justice coalition.
The activists will be in regular contact with rights watchdogs Amnesty International and Human Rights Watch.
The groups will also work to end the US occupation of Iraq.
No to occupation
"There were 40 million people in the streets against the war," Medea Benjamin of United for Peace and Justice, an organisation that groups about 600 anti-war non-governmental organizations said.
"This is a reorganisation of the anti-war movement to say 'no' to the occupation," she said.
Benjamin also criticised the process in which the US-led administration selected the 20-to 30 member "transitory governing council".
That council is expected to be unveiled by the head of the US administration Paul Bremer next week.
"A government selected by the coalition in a totally secretive process (is) a puppet government," she said.
The lack of transparency applied to business contracts to rebuild Iraq was also questioned.
"They give the contracts to US corporations with close ties with the Bush administration," she said.