The report by the Brussels-based ICG - a non-governmental organisation working to prevent and resolve deadly conflicts - said that the North Korean army possesses between 2,500 and 5,000 tonnes of chemical weapons, including mustard gas, sarin and other deadly nerve agents.
It also said the North has worked on developing biological weapons in the past.
"If there is an escalation of conflict and if military hostilities break out, there is a risk that they could be used," Daniel Pinkston, the ICG's representative in Seoul, the South Korean capital, said.
"In conventional terms, North Korea is weak and they feel they might have to resort to using those.
"The stockpile does not appear to be increasing but is already sufficient to inflict massive civilian casualties on South Korea," the report said.
In a separate report, the ICG said North Korea has also deployed more than 600 Scud-type missiles that could strike the South and as many as 320 Rodong missiles that could strike Japan.
The report repeats previous claims by the ICG that the North has developed a nuclear warhead that could be mounted on a Rodong missile.
But many weapons experts believe the North is still years away from being able to miniaturise a nuclear weapon to mount on a warhead.
Missile tests
The North fired a series of short-range missiles off its east coast just after its nuclear test in May and has recently warned ships to stay away from waters off its eastern city of Wonsan for the remainder of June, according to a Japan Coast Guard spokesman.
North Korea threatened to fire an intercontinental ballistic missile if the UN Security Council did not apologise for punishing Pyongyang for an April rocket launch, seen as a disguised missile test that violated UN resolutions.
North Korea responded to the latest UN sanctions for its nuclear test, by announcing it would start a uranium enrichment programme, which experts said could give it a second route to an atomic bomb, and that it would weaponise all its plutonium.
Analysts say the North's recent moves are aimed at rallying support domestically for Kim Jong-il, its 67-year-old leader, who appears to be laying the foundation for his youngest son to take over.
Jong-il is believed to have suffered a stroke last year.