"Stemming corruption requires strong oversight by parliaments, a well performing judiciary ... anti-corruption agencies, vigorous law enforcement ... as well as space for independent media and a vibrant society," Transparency chairwoman Huguette Labelle said in a statement.
She added that the international community must find ways to help war-torn countries to develop their own institutions.
The Berlin-based organization attributed the least corruptible countries' strong performance to their "political stability, long-established conflict of interest regulations and solid, functioning public institutions."
Afghanistan, which slipped to 179th place from 176th, has been dogged by corruption for years. Under heavy pressure from the U.S. government, Afghan President Hamid Karzai unveiled an anti-corruption unit and major crime fighting force on Monday following his fraud-tainted re-election.
Karzai's inability or unwillingness to tackle cronyism and bribery the past five years has given Taliban insurgents another argument with which to win support from the Afghan people. Nations supplying troops and aid are running out of patience with his government.
Transparency said public-sector corruption is rampant in Afghanistan.
"Examples of corruption range from public posts for sale and justice for a price to daily bribing for basic services," the report noted.
The United States, which was in 19th place compared with 18th last year, remained stable despite Transparency's concerns over a lack of government oversight of the financial sector.
"A swift government response to the financial crisis and moves towards regulatory reforms that include transparency and accountability measures may play a role in the country's score," the report said. "Nonetheless, it remains to be seen whether proposed reforms are far-reaching enough and to what extend they will be implemented."
The report also pointed out that the U.S. legislature is another reason for concern, as it is "perceived to be the institution most affected by corruption."
There were some bright spots in the new report -- Bangladesh, Belarus, Guatemala, Lithuania, Poland and Syria were among the countries that improved the most.
While corruption in Bangladesh is still widespread, "a caretaker government's nationwide crackdown on corruption during 2007-2008 and the instruction of institutional and legal reforms" have improved the conditions.
In Poland, the establishment of a ministerial office for anti-corruption and an increased number of investigations into corruption have improved the situation.
"No region of the world is immune to the perils of corruption," the watchdog's report said.
