Advances in drone technology, 3D printing and AI-assisted navigation should prompt leaders, including those in Australia, to rethink anti-extremism strategies, the paper from the Lowy Institute says.
The report points to a series of incidents in recent years as "warning signs" of what may be to come if governments don't crack down.
They include a UK student arrested for using a 3D printer to build 'kamikaze' drones for Islamic State, seven people arrested in Queensland who had homemade guns and a drone-mounted improvised explosive device, and two separate US plots involving drone use.
"What was once the exclusive domain of state actors now rests within reach of nearly anyone with a credit card and data signal," authors James Paterson and Lydia Khalil wrote.
"The combination of easy accessibility and payload potential, and the limitations of domestic counter-drone systems, presents a growing challenge."
Drones have also been used to deadly effect in the Russia-Ukraine war and Middle East conflict, where they are loaded with explosives and flown at military personnel or sensitive sites.
The report warns a vast array of civilian and military sites could be targeted, including mass gatherings and major events.
It argues "difficult decisions" will be needed to choose which locations to defend and how to do so.
The report recommends including "geofencing" technology in hobbyist and commercial drones, baking in restrictions which would prevent the unmanned aircraft from entering sensitive areas.
"Security personnel can (then) treat unidentified drones operating near sensitive sites as potentially hostile rather than spending time sorting genuine threats from casual rule violations," it says.
It also calls for greater co-operation between agencies to identify which kinds of drone defence systems would be suitable for civilian environments.
Restrictions should be placed on certain drone components, the report suggests, but these rules must be narrowly defined to avoid upsetting hobbyists with a genuine use for the parts.
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