He said the war divided the alliance just as it began to reinvent itself as a post-Cold War global security grouping. NATO members must move beyond ad-hoc cooperation on the ground with the United Nations and the European Union, he added.
"Simply put, we need to understand NATO not only as a forum for action. We must also understand it as a forum for debate," de Hoop Scheffer said.
"During the Iraq controversy, NATO was manifestly underutilized as a consultative forum. And we paid a high price for that. If we want to preserve and strengthen NATO ... we must engage in multilateral debate."
He said this was evident in the run-up to the Iraq war in 2003 when the United States, having failed to win unanimous backing from all NATO allies, went to war and engaged its own allies - notably France and Germany - in harsh debates at the United Nations Security Council.
"NATO is the forum where Europe and North America come together to shape a common approach to these new challenges," said de Hoop Scheffer. He said raising NATO's profile as a forum of consultations "will ultimately strengthen our political cohesion, reinforce our operational effectiveness and enhance our credibility in the eyes of our public."
While the alliance has changed since the fall of communism in Europe, its transformation is far from complete, de Hoop Scheffer said.
"We have to move away from the narrow, geographical approach to security that characterized NATO for almost five decades."
For starters, he said, NATO and the European Union - which has begun to develop a military dimension of its own - need to cooperate more closely.
"Our American friends understand that this is about making the union a stronger partner, not a counterweight" to NATO, de Hoop Scheffer told a conference on NATO's transformation bid to date.
Underlining American concerns, he cautioned Europeans not to duplicate "what NATO already offers" in security, as that would turn the United States lukewarm on NATO.
He said that, together, NATO and the EU face a huge security agenda, ranging from combatting terrorism to preventing the spread of weapons of mass destruction to dealing with "failed states."
"We need to better coordinate our policies for dealing with the world's pivotal regions," said de Hoop Scheffer.
ROBERT WIELAARD, Associated Press Writer