The government's chief law officer expressed a measure of scepticism about the new report, but Carr said he supported some decriminalisation so that police resources could be deployed elsewhere.
"A bit of modest decriminalisation, de facto decriminalisation at the edges, simply freeing up police to be doing the things they ought to be doing, would be a sensible way of going about it," he told the Seven Network.
His comments followed the report by think tank Australia21 released Tuesday that said the war on drugs had failed and Australia should consider legalising some substances such as cannabis.
The report was compiled by a high-profile group of Australians, including former state premiers, health ministers, a former police commissioner and a director of public prosecutions.
It called for a fundamental rethink of current policies to tackle the drug trade that it said had driven the scourge underground and allowed organised crime to flourish.
Every year some 400 Australians die from illicit drug use. The victims included the 64-year-old Carr's younger brother Greg in 1981.
"The key message is that we have 40 years of experience of a law and order approach to drugs and it has failed," said Michael Wooldridge, a former national health minister in conservative leader John Howard's government.
The report did not propose a specific set of reforms, but said its purpose was to re-ignite serious debate on the problem.
"It is time to reactivate Australian debate on this matter, drawing attention to the accountability of governments for allowing an unacceptable situation to persist, and the fact that the community has allowed this to happen," it said.
Attorney-General Nicola Roxon said the government was open to discussing new ways of tackling illegal drug use but warned there was a high threshold of community resistance to relaxing existing laws.
"The fact that we have challenges in being able to stop illicit drugs doesn't necessarily mean that deregulating it entirely and making them legal is going to prove the right solution," she told ABC radio.
"As a government we're always interested and happy to engage in debate.
"But there's a pretty high threshold that they're going to have to get over to convince, not just the government but the community, that this would be a positive step."