In a report to the Security Council on Wednesday, Annan warned that militias were still roaming Darfur, chasing people from their homes and harassing others in camps.
He put the responsibility for curbing them squarely on the government.
"This must stop," Annan said in the seven-page report. If it doesn't, he warned, "the culture of impunity that has taken hold in Darfur will become a critical obstacle to any reconciliation process".
The report on Darfur comes two weeks after Annan visited the region and called for boosting the responsibilities of African Union peacekeepers in Darfur.
The prosecutor of the International Criminal Court has meanwhile said the Hague-based body will complement Sudan's own tribunal to try alleged Darfur war crimes.
Kofi Annan visited Darfur earlier
Luis Moreno Ocampo, the ICC's chief prosecutor, said with reference to Khartoum's special court, which was due to hold its first hearings on Wednesday: "We will respect any genuine proceedings."
"We will assess carefully the national efforts and we will complement the efforts," the prosecutor said after meeting Egyptian Foreign Minister Ahmed Abul Gheit in Cairo on Wednesday.
Last week Khartoum argued that its judiciary was competent to carry out justice and that a Darfur-based court would try cases of "violation of honour, murder and looting or property crimes committed in Darfur".
Majdhub Khalifa, Khartoum's chief negotiator, said: "If the International Criminal Court wants to carry out observation tasks, in cooperation with the Sudanese judicial authorities, in order to feel relieved and certain, the Sudanese government has no problems or objections."
The Darfur crisis is based on the fight for land between nomads and subsistence farmers, and the Khartoum government says rebels took up arms against the state exploiting the situation.
led to the deaths of between 180,000 and 300,000 people, and left 2.4 million homeless since early 2003.
The fighting has
The UN accuses some Darfur tribal leaders of war crimes and has forwarded a list of names to the International Criminal Court (ICC).
Sudan's President Omar al-Bashir vowed in April never to hand over any Sudanese national to international jurisdiction.
The Darfur conflict has left about
2.4 million people homeless
Earlier Sudan's Minister of Justice General Ali Muhammad Usman Yasin said: "The [Sudanese] court will be an alternative to the International Criminal Court (ICC)," adding that Sudan had prepared a letter for the UN secretary-general on procedures leading to the establishment of the court.
Ocampo said he discussed the role of Egypt in assisting the ICC's investigation of war crimes, which have been committed in Darfur.
"It is our duty to investigate what happened in Darfur," he said.
"We will respect any genuine proceedings"
Luis Moreno Ocampo,
"The Darfur case was referred to the UN Security Council, which is acting under chapter seven of the UN charter," Ocampo said, referring to a provision which authorises foreign military intervention to enforce the decision.
"Therefore, all UN countries are expected to cooperate in this case," he said.
Arab countries, including Egypt, were reluctant to see the case of Darfur referred to the international court and have supported the establishment of a separate Sudanese judicial process.
Although Ocampo welcomed the level of cooperation between his court and Cairo, Abul Gheit said Khartoum should be given a chance to complete its own investigation of the alleged war crimes.
Abul Gheit warned against "adopting tough measures that would produce contrary results, not serve ongoing efforts to resolve the issue in the Sudanese region of Darfur and give a chance to the parties to deepen the crisis".
"The Sudanese government has expressed readiness to take action on the United Nations Security Council resolution and carry out the necessary investigations in the Darfur region," he said.
"It's important that the Sudanese government be given a chance to implement the law, pursue the criminals and achieve justice."
Khartoum warned last week that the launching of the investigation was counter-productive and could hamper the peace talks it is holding in Abuja with the rebel organisations.