Drones use in British skies will expand rapidly over the next 20 years, posing a serious security risk and significant privacy concerns, according to a University of Birmingham Policy Commission Report.
Shopping centres, sporting events and public rallies face being exposed to chemical or biological attacks by terror groups exploiting unmanned aircraft, research led by a former director of GCHQ has found.
Terrorists could also turn the Remotely Piloted Aircraft (RPA) into flying bombs by hooking them up to improvised explosive devices, intelligence experts have warned.
Drones are the "ideal lookouts for burglars, train robbers and poachers" and mean traditional ways of securing buildings can be bypassed, it said.
Lightweight commercial RPAs are also likely to become the "weapon of choice" for paparazzi in search of intimate photographs of celebrities, according to the report.
Police in the West Midlands, Staffordshire, Merseyside and Essex have acquired or used drones for surveillance and guidelines must be looked at governing how and when they can be used, it added.
The research, led Sir David Omand, a former director at the Government's listening post, found greater civil and military use of the unmanned aircraft is inevitable and could have "significant benefits" for the UK's security and economy.
But it calls for the Government to be open and transparent about the use of the controversial aircraft to increase understanding and acceptance of the "legal and ethical soundness" of using drones.
It comes after a suspected drone pilot was arrested yesterday on suspicion of breaching the air navigation order after a device was flown over a packed football stadium.
The 41-year-old man from the Nottingham area was held in the car park of an Asda supermarket near Manchester City's Etihad Stadium after reports of a drone flying over a stand during Saturday's match against Tottenham Hotspur.
Meanwhile, the government has announced that British Reaper drones are to fly missions over Syria to gather intelligence on the terrorist threat from Islamic State (IS).
The Commission suggests that concerns about the use of military drones stem from US use of armed RPAs beyond legally accepted boundaries and urges the Ministry of Defence to do more to reassure the public that British aircraft will continue to be subject to strict rules.
Safeguards must be in place to ensure that in sharing intelligence with the United States, the UK "does not inadvertently collude in RPA or other counter-terrorist actions contrary to international law", it said.
Assurances must also be obtained to ensure that any use of British RPAs by allied forces is carried out in accordance with UK legal guidelines, the Security Impact of Drones: Challenges and Opportunities for the UK report recommends.
The commission calls for "urgent" measures to safeguard British airspace and the privacy of citizens to cope with civil and commercial use, which is expected to be more widespread by 2035.
The report states: "The security threat posed by individuals misusing RPA is a serious one, whether for criminal or terrorist purposes. While the hazards presented by inadvertent or accidental misuse of RPA, or the consequences of their malfunctioning are becoming better understood, more thought needs to be given to their employment for malign purposes in the domestic environment."
It adds: "Vulnerable targets might be hardened to withstand attack from outside, but it is entirely possible that in a public space like a shopping centre or sporting stadium, an attack could be launched from within.
"Crowds at sporting events or rallies could be vulnerable in a similar way if a future terrorist group were to look for means of dispersing chemical or biological agents. While such a scenario has so far not posed a real danger to UK citizens, as noted below, it is a threat that the UK authorities took seriously during the 2012 Olympics."
The increased capacity of military, recreational and commercial drones raises "significant safety, security, and privacy concerns", the report said.
Drones under 20kg can be used within line of sight of the operator and with permission of the CAA but enforcing breaches is likely to become a major policy issue, it adds.
Small commercial aircraft, including for taking photographs, are already "clearly being flown", often in breach of the rules, the commission found.