But the report the organisation's secretary-general Kofi Annan issued to the UN Security Council, written by his senior adviser Al-Akhdar al-Ibrahimi, said proper organisation of polls would probably not be possible until next year and warned of factionalism in the country.
"If the work was started immediately and the required political consensus was reached fairly rapidly, it would be possible to hold elections by the end of 2004," said the report, issued after al-Ibrahimi led a UN electoral mission to Iraq earlier this month.
But al-Ibrahimi and his team said Iraqis might need until next year after setting up a legal framework for the polls.
They said Iraqis doubted whether electoral laws and institutions could be set up before May, after which at least eight more months would be needed.
Annan and al-Ibrahimi did not make any recommendations on the key question of how Iraqis would select a caretaker government once the US-led occupation was scheduled to end on 30 June.
Instead it gave a series of options ranging from putting a "technocrat" government in office to expanding the current 25-member UN Governing Council.
The Bush administration, which is trying to re-engage the United Nations in efforts to stabilise the country, had asked the world body to come up with proposals for Iraq's political future before and after the 30 June transfer of power.
The report recommended an "autonomous and independent Iraqi Electoral Commission be established without further delay."
Carina Perelli, head of the UN election unit, who went to Iraq with al-Ibrahimi, said such an independent commission was extremely important "to demonstrate a break with the past."
Formula and consensus
UN officials said it was likely al-Ibrahimi, a former Algerian foreign minister, would go to Iraq next month for another visit and help mediate a formula if the Iraqis and the US-led occupation forces did not produce one.
Shia Muslim leader Ayat Allah al-Sistani
has demanded direct elections
But the report made clear consensus would be difficult.
"After more than three decades of despotic rule, without the basic elements of rule of law, a ruined economy, a devastated country, the collapse of state institutions, low political will for reconciliation, and distrust among some Iraqis, conditions in Iraq are daunting," the report said.
Original US plans for the handover, which involved regional caucuses choosing an assembly that would select a government, were derailed after a leading Shia cleric, Ayat Allah Ali al-Sistani demanded early direct elections.
The al-Ibrahimi report listed a number of options and asked whether original plans for a legislative assembly to choose a government could be condensed into one operation.
The report said a provisional government might be composed mainly of competent technocrats, which some diplomats interpreted as leaving the current ministers in office until elections.
"If the work was started immediately and the required political consensus was reached fairly rapidly, it would be possible to hold elections by the end of 2004"
Other options included expanding the existing Governing Council to 150 to 200 members to act as a transitional legislative body that would elect an interim government.
Another was to convene a national conference of delegates from across Iraqi society to establish a temporary government.
And yet, another suggestion was to convene a forum consisting of representatives of the main political, religious and other groups and develop a consensus on an interim caretaker authority.