The study also found that such a strategy could virtually eliminate HIV transmission.
Scientists developed a computer modelling to project what would happen if everyone over 15 was tested every year.
They found that diagnosis and immediate treatment with anti-retroviral drugs could reduce cases of AIDS in a generalised epidemic from 20 in 1,000 people to just one in 1,000 within 10 years.
They also found that the strategy could virtually eliminate HIV transmission and new infection.
However, the WHO warns that the feasibility of universal testing is challenged by weak health systems.
It cautions that giving treatment to patients who are not yet sick may increase drug resistance, while the side effects of taking Aids treatment drugs for very long periods are as yet unknown but could be severe.
"At its best, the strategy would prevent morbidity and mortality for the population, both through better treatment of the individual and reduced spread of HIV," BBC quoted quoted Dr Geoffrey Garnett, from Imperial College London, as stating in The Lancet.
"At its worst, the strategy will involve over-testing, over-treatment, side effects, resistance, and potentially reduced autonomy of the individual in their choices of care," Garnett added.