The report is based on research led by David Omand, former head of UK intelligence agency GCHQ.
The Birmingham University report recognises that the increased use of drones could bring some security and economic benefits, but calls for urgent measures to safeguard UK privacy and airspace.
Police in Merseyside, Staffordshire, Essex, Wiltshire and the West Midlands have bought drones for surveillance, but the report said there should be strict guidelines governing their use.
The report raises security concerns that drones could be used by terror groups, criminals and paparazzi.
“More thought needs to be given to their employment for malign purposes in the domestic environment," the report said.
In particular, the report said drones could be used for chemical or biological attacks on public spaces such as shopping centres and sporting stadiums.
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Increasing use of drones
Currently, drones of less than 20kg can be used in line of sight of the operator and with the permission of the Civil Aviation Authority. But the report calls for stricter measures to cope with increased civil and commercial use.
Earlier this week, a 41-year-old man was arrested on suspicion of breaching an air navigation order when a drone was flown over Manchester City's home game with Tottenham Hotspur, reports the BBC.
Greater Manchester Police said the drone could have posed a threat to crowd safety and caused alarm.
The MoD recently confirmed the UK plans to fly drones over Syria to gather intelligence on Islamic State militants.
Omand said the decision was welcome, provided the technology was used "in accordance with international law”, reported the BBC.
He said the research had highlighted the need for more work on the policies for such applications.
“We hope that our findings will help clarify the issues that will need more attention, as well as providing a vision for how the UK can exploit this innovative technology," Omand said.