Yanghee Lee, the UN Special Rapporteur on Myanmar, was speaking after a nearly two-week visit to the Buddhist-majority nation, her first since Aung San Suu Kyi's pro-democracy party took office several months ago, ending five decades of military rule.
Suu Kyi, a globally celebrated champion for human rights, has faced criticism for not taking a stronger stance on the Rohingya's plight as she leads her country into a new era.
Lee's visit included a trip to strife-torn Rakhine, a western region scarred by bouts of religious bloodshed between Buddhists and Muslims in 2012.
"My visit to Rakhine State unfortunately confirmed that the situation on the ground has yet to significantly change," Lee told a press conference in Yangon, describing overcrowding, dilapidated shelters and poor sanitation in the camps.
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"The continuing restrictions on the freedom of movement of the Rohingya and Kaman communities cannot be justified on any grounds of security or maintaining stability," Lee added.
Many in Myanmar reject the term Rohingya and insist the group are illegal immigrants from neighbouring Bangladesh, despite their deep roots in the country.
Suu Kyi's government ordered officials ahead of Lee's visit to refer to the group simply as "people who believe in Islam" rather than Rohingya -- a term whose use has in the past set off protests by Buddhist nationalists.
The Nobel peace prize winner has asked for "space" while her administration seeks to build trust between religious communities.