Proposals to introduce drug consumption rooms in Glasgow have been blocked
The Scottish Affairs Committee also recommended the UK government should back safe consumption rooms in Scotland in a bid to tackle drug misuse.
Drug-related deaths in Scotland reached an all-time high of 1,187 last year.
The Home Office said it had no plans to decriminalise drug possession and that doing so would not eliminate crime associated with the illicit drug trade.
All UK drugs misuse legislation is currently reserved to Westminster.
However, the committee of 12 Scottish MPs said the government must be open to taking radical steps after the latest figures showed Scotland's death rate from overdoses was far more than the rest of the UK and higher than any other EU country.
The cross-party committee, chaired by SNP MP Pete Wishart, included four Conservative MPs, three Labour members, two Lib Dems and two other SNP MPs.
Mr Wishart told BBC's Good Morning Scotland Programme: "It's disappointing to see such a knee jerk response from the Home Office.
"This is a carefully considered piece of work, the most in-depth inquiry into problem drug use in Scotland ever conducted.
"Criminalising drug users is counter-productive and we need to review it now. We need to pull the big levers and affect big change."
They cross-party committee conducted what they called one of the most extensive inquiries ever carried out into problem drug use in Scotland.
Their recommendations include the decriminalisation of drugs for personal use and new legislation to provide for safe drug consumption facilities.
It said that if the UK government refused to change the law, the relevant powers should be devolved to Scotland.
The report also said the Scottish government must do more to ensure drug treatment services were properly funded and supported.
How would decriminalisation work?
The Daily Record has been campaigning for decriminalisation of drug use
They want the possession of small amounts of drugs for personal use not to be a criminal matter. It would still be illegal to supply drugs and police resources should be concentrated on that, they said.
The MPs, who also gathered evidence in Portugal and Canada, found that decriminalisation was a "public health" approach that could cut the stigma around problem drug use and encourage people to seek treatment.
They called for the Department for Health and Social Care to take over lead responsibility for drugs policy from the Home Office.
What are safe drug consumption facilities?
It is three years since Glasgow City Council first proposed allowing users to take their own drugs under the supervision of medical staff at a special facility in the city, but the idea has been blocked by the Home Office.
Sometimes dubbed "fix rooms", they would be the first of their kind in the UK, with the aim being to encourage users who inject heroin or cocaine on Glasgow's streets to enter a safe and clean environment.
It is hoped the special site would encourage addicts into treatment, cut down on heroin needles on city streets and counter the spread of diseases such as HIV.
The committee report said there was overwhelming evidence that fix rooms reduced the health risks, but they were not a "silver bullet" for problem drug use.
The MPs expressed "deep regret" that the Home Office had chosen to block the Glasgow plan and said the UK government's reasons for doing so were "not convincing".
What can the Scottish government do?
The MPs said that drugs legislation was reserved to Westminster, but the Scottish government could be doing more on the delivery of drug-related health treatment.
The report said Scottish government decisions, such as cutting funding for Alcohol and Drug Partnerships, had made the situation worse.
Health services for problem drug use in Scotland must be properly funded, they said.
The Scottish government said it welcomed support for the introduction of a safe drugs consumption room in Glasgow as part of efforts to reduce deaths there.
A spokeswoman added: "The outdated Misuse of Drugs Act 1971 should be amended to allow us to implement a range of public health focused responses, including the introduction of safe consumption facilities in Glasgow.
"We call on the incoming UK government to amend the Act or to devolve those powers to Scotland."
So why do we still have wars on people minding their own businesss? Using a plant that's never killed a soul to imprison way more than one million typical human lifespans in the USA, alone, (I'd estimate); meanwhile the overt states make 100s of millions on Alcohol and Tobacco taxes;
And the Covert Secret State Makes BILLIIIONS by ensuring drugs remain ILLEGAL, SO THAT THEY CAN SHOOT BLACK LABS in front of 10 year old girls, and claim it's the fault of a father whiile they 'take it easy by smoking cigarettes to 'calm down' after the fact, and ARE TOO FUCKING STOOPID to see the irony!
R.C..