The Scottish Government-commissioned study concluded the 1701 Act of Settlement was evidence for some of the state "harbouring implicit and unacknowledged sectarianism."
The law has existed since the end of the Stuart monarchy in the early 18th century.
The Scotsman has reported that while changes to the succession laws in 2011 gave both females and males an equal claim the to throne and lifted the ban on a monarch having a Catholic spouse, it did not lift the ban on a Catholic sitting on the throne.
The report stated that: "The formal existence of the Act of Settlement continues to represent a symbol with significant consequences for belonging and attachment to the state."
"Changing such a pivotal element of the British constitution will inevitably be a complex and controversial task, raising questions of the disestablishment of state religion and questions of the implications for different church approaches to such issues as divorce, remarriage and the religious obligations on parents.
"However, it is imperative that any implication that the state excludes Catholics or any other (non) belief community from full civic equality is repudiated in principle and practice."
It also asked football clubs to do more to tackle sectarianism, and for Churches increase efforts to teach and understand different faiths.
Dr Duncan Morrow, a lecturer at the University of Ulster who led the advisory group, said: "Our work over the last two years has explored how sectarianism continues to manifest itself in Scotland today and how it still has the power to impact negatively on people's lives.
"But we have also seen a strong hunger for change across Scotland and a real desire to make sectarianism a thing of the past.
"I believe that this desire amounts to a real commitment from Scotland's communities and a challenge for leaders and institutions to set out a clear and inclusive vision that rejects avoidance and blame."
Following the 2011 changes to the law, Prime Minister David Cameron said it was important for future monarchs to remain in "communion with the Church of England" because they would be the head of that Church.
A Scottish Government spokesman said: "The Scottish Government has always supported the repeal of the Act of Settlement."
