The secretary-general of the UN said on Friday: "I take this opportunity to appeal to General Than Shwe and the government to release her.
"I am relying on you, General Than Shwe, to do the right thing. For the democratic process and the reconciliation process to be truly successful, it has to be inclusive and she has a role to play."
Aung San Suu Kyi's current detention period is due to expire this weekend, but it has previously been extended on such occasions.
Her National League for Democracy (NLD) party, which won a 1990 election by a landslide only to be denied power by the army, should also be allowed to participate in a "national dialogue" on the future of the country, Annan said.
Aung San Suu Kyi has spent 10 of the past 16 years behind bars or under house arrest. But she was allowed a visit last weekend from a UN official, raising hopes for her release.
Malaysia, which currently holds the chairmanship of Southeast Asia's regional political grouping, of which Myanmar is a member, echoed Annan's words.
Syed Hamid Albar, the foreign minister who visited Myanmar in March as an envoy of the Association of South East Asian Nations, said: "I don't think it's beneficial for Myanmar to keep her indefinitely.
"One of the best ways, rather than to renew the detention, is to release her. The government is very strong and very stable. They are able to maintain security. Why should they be worried?"