The report also says two million people within the country are currently displced, while more than two million are refugees.
Most of those refugees have fled to Jordan and Syria.
"Many of the figures and percentages in the report were actually derived from UN sources… so we concur with the findings"
Said Arikit, spokesman for the UN mission in Iraq
Read the joint report
Said Arikit, a spokesman for the UN mission in Iraq, told Al Jazeera the report painted a "grim picture".
"Many of the figures and percentages in the report were actually derived from UN sources… so we concur with the findings," he said.
"The government of Iraq is definitely the authority in Iraq and it bears responsibility for the welfare of its people."
Iraqi services have been left in crisis as most of those seeking refuge are professionals, according to the report.
"The 'brain drain' that Iraq is experiencing is further stretching already inadequate public services, as thousands of medical staff, teachers, water engineers, and other professionals are forced to leave the country," it said.
The entry of Iraqi refugees to neighbouring countries has placed a growing strain on health, education and social services in the two countries.
Only 60 per cent of the four million people who depend on food assistance have access to rations from the government-run public distribution system, down from 96 per cent in 2004, the report said.
The number of Iraqis without access to adequate water supplies has risen from 50 per cent to 70 per cent since 2003.
The lack of effective sanitation was also highlighted by the joint report, which said 80 per cent of people in Iraq did not have safe access.
The report said children were the hardest hit by the fall in living standards, stating child malnutrition rates have risen from 19 per cent before the US-led invasion in 2003 to 28 percent currently.
"Despite the constraints imposed by the government of Iraq, the UN and the international donors can do more to deliver humanitarian assistance to reduce unnecessary suffering," the report said.
One recommendation called for the government of Nuri al-Maliki, Iraq's prime minister, to decentralise the distribution of aid to local authorities, and make it easier for civil society organisations to operate.
Meanwhile in Iraq, officials from the US military say they have seen a drop in US troop deaths in July.
In April, the number of US soldiers who died was 104, increased sharply in May when 126 servicemen died, and decreased slightly with 101 troops dead in June.
For the month of July, at least 69 US soldiers have died, about half the casualties in May.
Iraq's police say the number of civilian deaths also decreased by 36 per cent, from an estimated high of 1,900 in May to 1,342 in June.
General David Petraeus, the US commander in Iraq, said: "The sheikhs and the tribes and the leaders have banded together and made a decision to oppose al-Qaeda and that has resulted in a substantially improved security situation."
Despite what appears to be at least a temporary let-up in both military and civilian deaths, many say there will be no security without a stable Iraqi government.