The treatment of about 500 terrorism suspects at the prison has encouraged hatred towards the West and bolstered membership of the al-Qaida network, the report by the Organisation for Security and Cooperation in Europe (OSCE) concluded.
The OSCE commissioned the report from its human rights representative, Belgian senate president Anne-Marie Lizin, and will vote next week whether to accept its findings.
"A generation of young Muslims, fed on the images of Abu Ghraib, of the treatment reserved for the Guantanamo detainees and rumours about profanation of the Quran, will have filled the al-Qaida ranks and those of other extremist groups," said the report made public on Friday.
"The longer the detention is in the camps the more the hatred against the US and the West becomes anchored in hearts and minds," it said.
"Being fully aware of the US authorities' dilemma between national and world security and long procedures, we recommend terminating the Guantanamo detention facility by announcing a calendar of closure."
The US government, increasingly under pressure at home to close the prison, has said it is key to protecting the country from further attacks. Last week it said it was addressing abuse claims and holding prison staff to account.
The OSCE, consisting of 55 member nations from Europe, North America and the former Soviet republics, is an organisation that aims to maintain security and flag conflicts and human rights issues in its region. The US is a member.
"The longer the detention is in the camps the more the hatred against the US and the West becomes anchored in hearts and minds"
Human rights groups as well as institutions such as the European Parliament and the Council of Europe have criticised the US for holding detainees there for indefinite periods and not assigning them prisoner of war status.
Instead, suspects are labelled "enemy combatants", something the new report called a legal nonentity under international law.
Meanwhile, Aljazeera's correspondent Muhammad al-Alami, who visited the Guantanamo prison, reported that the US had eased some restrictions.
Military officers at the base insisted that they respected the rights of detainees and their religious beliefs, the correspondent reported.