It has called on parliament to adopt a formal resolution stating the all-encompassing veil is "contrary to the values of the republic".
But the opposition Socialists, who condemn the full veil, have said they would not endorse the final report, saying it would amount to an inconsistent "ad hoc law".
The report is likely to raise concerns that its recommendations will unfairly stigmatise France's Muslim population, estimated at about six million.
Of those, only about 2,000 are thought to wear the niqab, which covers all of the face except the eyes.
Marwan Muhammed, a French Muslim author, said the announcement was "about sending a message to the Muslim community".
"The message is clear to the average Muslim woman. 'If you want go down the route of practicing your religion here is how we are going to treat you in the future'," he told Al Jazeera.
"Also most French citizens, Muslims included are for freedom - the freedom to practice your religion, the freedom to dress however you want to dress, whether that be in a miniskirt or a complete niqab.
"This will reduce the overall freedom of the French citizen, but it is a smart move if you are Sarkozy's government."
Tuesday's report is the culmination of a six-month inquiry into the issue, after Nicolas Sarkozy, France's president, said full-body veils were "not welcome" in the country.
The veil is widely viewed in France as a gateway to extremism, an insult to gender equality and an offense to France's secular foundation.
A 2004 French law bans Muslim headscarves from primary and secondary school classrooms.
"The French state cannot use coercive power, in the form of criminal law, to force Muslim women to take off the niqab in public"
law lecturer at King's College, London
Andre Gerin, chair of the parliamentary commission and a communist politician said the "wearing of the full veil is the tip of the iceberg".
"There are scandalous practices hidden behind this veil," he said.
Shaaz Mahboob, the vice-chair of the British Muslims for Secular Democracy, told Al Jazeera: "The niqab has no place in Islam. It is incompatible in Islam.
"It's a security issue, it's a communication issue and it's a barrier to integration in a lot of ways. So it disadvantages those who are trying to communicate with them; those who are trying to live alongside them, and those who are trying to share the same public sphere as them."
But Maleiha Malik, a lecturer in law from King's College, London, told Al Jazeera: "The key issue is one of religious freedom.
"The French state cannot use coercive power, in the form of criminal law, to force Muslim women to take off the niqab in public. They are citizens and they have the same right to public space as those people who want to communicate with them."
It is not yet clear whether the government, or parliament, will take up any or all of the report's recommendations.
Any action is not expected to come before March regional elections.