Northern Ireland's ceasefire watchdog, the Independent Monitoring Commission (IMC), said in the report that it believed the IRA, which pledged last year to end violence for good, was no longer engaged in terrorism.
"The IRA's campaign is over," Tony Blair said in a televised speech after its publication on Wednesday.
Northern Ireland's 30-year conflict between mainly Catholic Irish republicans and pro-British Protestants, in which 3,600 people were killed, largely came to an end with the US-brokered Good Friday Agreement in 1998.
However, politicians have struggled to sustain the arrangements for local government established under that deal. The assembly, in which Catholics and Protestants ran the province's affairs, was suspended in 2002.
Continued IRA violence was one of the main barriers to its restoration.
"The door is now open to a final settlement," Blair said.
Wednesday's report intensifies pressure on Northern Ireland's main pro-British grouping, the Democratic Unionist party, to agree to power-sharing and on the anti-British republicans to formally support a police force they for years rejected as sectarian.
The DUP refuses to govern alongside the IRA's political ally, Sinn Fein, until it is convinced the IRA has given up violence for good.
Its leader Ian Paisley gave the report a cautious welcome.
"The assessment by the IMC that the Provisional IRA is progressively abandoning its terrorist structures shows that the pressure being brought to bear on republicans by the unequivocal policies of the DUP is working," he said in a statement.
However, he said Sinn Fein still needed to show they supported the police and rule of law in the province.
The IMC said the IRA had disbanded "military" structures, including departments responsible for procurement, engineering and training, but noted some individual IRA members were still involved in criminal activity for personal gain.