Kofi Annan, the UN secretary-general, said on Tuesday that Lebanon must set its borders with Syria and disband Hizbollah before it could be master of its own nation.
In turn, Syria should take up Beirut's offer of establishing diplomatic relations as well as demarcating the entire 250km boundary between the two countries, Annan said in the report.
"A united Lebanon has offered an out-stretched hand to Syria," Annan said. "I call on Syria to accept this offer and undertake measures, in particular, to establish embassies and delineate the border between Syria and Lebanon."
The 23-page report, prepared by Terje Roed-Larsen, the UN envoy, is a response to Security Council resolution 1559 of September 2004 that called for Syria to withdraw from Lebanon and for Lebanon to disarm militia, so the Beirut government could control the entire country.
Syria and Lebanon have not had embassies on each other's territory since 1920.
Damascus says its many bilateral ties rather than embassies suffice for the present.
In his third bi-annual report to the UN Security Council, Terje Roed-Larsen welcomed the recent agreements sealed as part of the inter-Lebanese National Dialogue.
"With the agreements unanimously reached in the National Dialogue and their initiative to work pro-actively and constructively with the Syrian Arab Republic, a united Lebanon has offered an out-stretched hand to Syria," he noted.
He urged them to agree on demarcating the border along the so-called Shebaa Farms, a small mountainous territory at the convergence of the Lebanese-Syrian-Israeli borders.
Israel captured Shebaa Farms
from Syria in 1967
Israel captured the area from Syria in the 1967 Middle East war, and it is claimed by Lebanon with Damascus's consent. The UN regards the Shebaa Farms as Syrian territory.
Roed-Larsen also made "an urgent call for the full implementation" of the Taif Agreement, named from the Saudi city of Taif where it was signed in 1989, which calls for the dismantling of all Lebanese and foreign militias operating in Lebanon and the delivery of their weapons to Lebanese authorities.
"I also urgently call on all parties who have the ability to influence [the Lebanese Shia group] Hezbollah and other militias to support the full implementation of resolution 1559," Roed-Larsen said.
He also pointed to the concern expressed by the Security Council about "movements of arms and people into Lebanese territory" and pressed Damascus to take steps to halt such movements.