The report on Tuesday recommended that Norway alter its 1814 constitution, which also states that the nation's values are based on those of the Lutheran Church and that half the government ministers must be church members, to reflect a modern multi-faith society.
"This would mean the biggest changes in the Church for 400 years," the government's church minister, Trond Giske, told Reuters. The last big change was the Protestant split from Roman Catholicism in the 16th century Reformation.
Giske said he had yet to discuss the report with King Harald, 68, head of state and Church since 1991. The palace declined comment.
Olaf Haraldson, the Viking warrior king, brought Christianity to central Norway in the 11th century after converting during a raiding tour of England, and imposed the faith on the local population.
In the mid-16th century some European countries, including Scandinavian nations, formally tied their churches to the state in the Reformation. The largest is now the Anglican church headed by Queen Elizabeth II of England.
European churches have had to adapt to modern multi-faith societies with an emphasis on freedom rather than conformity. In 2000, Sweden became the first Scandinavian country to separate church and state.
"There is a growing perception in Norwegian society of the church-state link clashing with human rights, a perception that it unfairly favours one religious community over others," said Jan-Olav Henriksen, a Norwegian School of Theology professor.
"There has been a shift in perceptions and it may be that Norwegians no longer see the Church as representing their values"
Professor, Norwegian School of Theology
The United Nations has rated Norway the best place to live for the last five years and Norwegians consider their country at the forefront of modernity and equal rights.
"There has been a shift in perceptions and it may be that Norwegians no longer see the Church as representing their values," Henriksen said.
Norway has had less immigration than its Scandinavian neighbours but Muslims from Africa, Asia and the Middle East have moved to Norway over the last few decades. Eighty percent of its 4.5 million people are nominally church members but attendances have been dropping.
The commission's report launched a nationwide debate on church-state ties, and will lead to a Parliamentary bill within three years. It would take several more years to change the constitution, if that is what parliament decides to do.