Reaction and stopping times were much slower
Tests by scientists at the Transport Research Laboratory said drivers on mobiles had slower reaction times and stopping times than those under the influence of alcohol.
And it said hands-free kits were almost as dangerous as hand-held phones.
Using a hand-held mobile while driving is illegal in more than 30 countries, but in the UK drivers are usually prosecuted for dangerous or careless driving.
Roger Vincent of the Royal Society for the Prevention of Accidents called for a specific offence of using a mobile while driving for the UK - even with a hands-free kit.
"The problem is you actually get sucked into the telephone conversation, and the conversation starts to take precedence over the driving task," he told BBC News.
"The person on the end of the phone doesn't know the driving conditions around you. If someone's in the car talking to you they can stop talking if a dangerous situation arises.
"People just don't seem to understand how distracting these telephone conversations are."
The research said reaction times were, on average, 30% slower when talking on a mobile than when just over the legal limit, and nearly 50% slower than when driving normally.
Drivers were also less able to maintain a constant speed and found it more difficult to keep a safe distance from the car in front.
In the tests at 70 miles per hour, the braking distance was 102ft (31m), which increased to 115ft (35m) with alcohol; 128ft (39m) with a hands-free phone and 148ft (45m) with a hand-held mobile.
Janet Anderson, MP for Rosendale and Darwen, is currently trying to push a bill through which would ban the use of hand-held mobile phones while driving.
The second reading is expected to take place on 12 April.
Welcoming the report's findings, Ms Anderson said: "We must all recognise that driving and using mobile phones can kill. It takes less than a split second for a lapse in concentration to result in an accident.
"It must therefore be made crystal clear to drivers who insist on behaving in this way that they endanger the safety of the public generally, and their own safety too. "