The millennium-old system is no longer a benign form of self-administration in close-knit Uzbek neighbourhoods, but a "national system of surveillance," Human Rights Watch (HRW) said in a report.
President Islam Karimov, whom critics accuse of using the threat from Islamist opponents as a pretext to stamp out dissent in the nation, declared 2003 the "Year of the Mahalla".
But Human Rights Watch report said: "Mahalla committees assist the government in its crackdown against peaceful, independent Muslims who practice Islam outside government-controlled religious institutions."
The Central Asian nation is now divided up into 12,000 mahallas, each counting between 150 and 1500 households.
"Mahallas are the eyes and ears of the government, passing on all they observe to the police," HRW quoted Rachel Denber, deputy director of its Europe and Central Asia Division, as saying.
"Mahallas are the eyes and ears of the government, passing on all they observe to the police"
Human Rights Watch
Karimov has defended his authoritarian government on the grounds he is concerned about the advance of Islamist influences from unstable Afghanistan next door.
International human rights bodies estimate up to 6500 political prisoners languish in Uzbek jails, where deaths from torture are common.
However, Karimov turns a deaf ear to calls from the United Nations to stop systemic torture.
HRW said in 2000-2001 mahallas had aided the government's forced resettlement programmes in southern Uzbekistan.
It said those blamed for links with Islamic groups had been driven to resettlement villages and deprived of any means of livelihood.