The bipartisan group of Arab-American scholars, former diplomats and opinion formers concluded that America's efforts to promote itself positively to Muslims and Arabs was in need of an urgent overhaul.
"What is required is not merely tactical adaptation but strategic, and radical, transformation," the panel stated in its report, "Changing Minds, Winning Peace," which was leaked to the New York Times.
"A process of unilateral disarmament in the weapons of advocacy over the last decade has contributed to widespread hostility toward Americans and left us vulnerable to lethal threats," it concluded.
The US advisory group on public diplomacy for the Arab and Muslim world, which was assembled in June, found that the state department spent only three-tenths of 1% of the defence department's budget on advocating US policies.
Just over 10% of this spending was in mainly Muslim countries, and once costs and exchange programmes were taken into account, just $25m went on "outreach programmes".
"You know, Woody Allen said 90% of life is just showing up," said Edward P Djerejian, an Arab specialist, former ambassador and White House spokesman, who led the group. "In the Arab world, the US just doesn't show up."
The panel recognised that the problems were most likely rooted in US foreign policy, but that Washington could do far more to present its side and rebut misinformation.
The report called for more resources and the establishment of a White House coordinator for public relations efforts abroad. Other suggestions were for libraries and information centres in the Muslim world, the translation of more western books into Arabic, and the upgrading of America's internet presence.