The report suggests the supply of cocaine could be state controlled
Cocaine could be sold in pharmacies and cannabis in coffee shops under suggestions for decriminalising drugs set out by think tank Transform.
The body, which campaigns for the legalisation of drugs, says its ideas would reduce crime and improve health.
Its "blueprint" for how to regulate currently prohibited drugs is set out in a new book.
But the Home Office said it had "no intention of either decriminalising or legalising currently controlled drugs".
She added: "Drugs are controlled for good reason they are harmful to health. Their control protects individuals and the public from the harms caused by their misuse."
The book was launched at receptions in the House of Commons and in Glasgow.
Transform's Head of Research and book author Steve Rolles said: "Drugs are here to stay, so we have a choice - either criminals control them, or governments do."
He added: "By the cautious implementation of a legally regulated regime, we can control products, prices, vendors, outlets, availability and using environments through a range of regulatory models, depending on the nature of the drug, and evidence of what works."
'Licensed pharmacy models'
Describing the prohibition of drugs as a "counter-productive failure", the book says a "major barrier to reform" has been uncertainty over how legalisation could function.
The report suggests models of regulation for different types of drugs.
It proposes that the sale and consumption of cannabis and opium, for example, could take place at membership-based "coffee shop style" licensed premises.
For cocaine powder, ecstasy and amphetamines it recommends "licensed pharmacy models" together with licensed or named purchasers.
The group of "psychedelics", including hallucinogens such as LSD, could be subject to supervised use in "drug clubs" or groups in licensed venues, the book suggests.
The book says prescription and supervised use would be needed for the riskiest drugs and preparations, including injectable drugs, which are most associated with problematic or chronic dependent use.
Craig McClure, a former executive director of the International Aids Society and author of the book's foreword, said that criminalising drugs had led to a dramatic increase in drug-related harms.
He said: "A range of Latin American governments have already moved, or are moving, towards decriminalisation of drug possession and are shifting to a public health model to prevent and treat misuse of drugs.
"They are no longer able to tolerate the damage done to their societies by the war on drugs."
But a Home Office spokeswoman said it was difficult to make direct comparisons with the drug use and drug policies of different countries or cultures.
She said: "The government must decide what policy will work for Britain in its present economic, social and cultural climate."