The Office of the Correctional Investigator is urging prison officials to take another look at the former Guantanamo Bay inmate's classification.
In his letter, Ivan Zinger says Khadr has shown no evidence of problematic behaviour and there is no reason he could not be safely managed at a lower security level.
He also notes the Americans had categorized him as minimum security.
Khadr was transferred to Canada last September to serve out the remainder of an eight-year U.S. sentence for war crimes committed in Afghanistan when he was 15.
Khadr spent the next several months in segregation at the maximum security Millhaven penitentiary in Ontario before transferring to an Edmonton prison in late May.
Prison officials have defended the maximum-security classification, arguing among other things that Khadr poses a moderate escape risk.