The Foreign Affairs select committee report found that it was becoming more difficult to tackle the threat of international terrorism. It also said any military action against Iran would probably trigger "extremely serious consequences".
The report added the security situation had deteriorated in Iraq and Afghanistan, in both of which Britain has troops deployed.
"Despite a number of successes targeting the leadership and infrastructure of al-Qaeda, the danger of international terrorism, whether from al-Qaeda or other related groups, has not diminished and may well have increased," the assessment said.
"Al-Qaeda continues to pose an extremely serious and brutal threat to the United Kingdom and its interests.
"The situation in Iraq has provided both a powerful source of propaganda for Islamist extremists and also a crucial training ground for international terrorists associated with al-Qaeda."
Resolutions needed
Progress towards resolving key international conflicts would go some way towards removing the widespread feelings of injustice in the Muslim world that feed into causes of and support for terrorism, the report said.
The committee recommended that the government set out the circumstances under which it would withdraw British forces from Iraq and urged that wherever and whenever possible, detainees should be handed over to the Iraqi government for trial.
The MPs expressed their concerns about Iran's nuclear ambitions but issued a strong warning against military action, except as a last resort.
"Military action against Iran would be likely to unleash a host of extremely serious consequences, both in the Middle East and elsewhere, and would not be guaranteed to prevent Iran from developing nuclear weapons in the long term," the report said.
"The government should not undertake or support military action against Iran until all other options have been exhausted or without broad agreement among its international allies."