The area under cultivation rose by 36 percent in 2013, the UN drugs agency UNODC said in its annual report on Afghanistan, while production of opium, the main ingredient in heroin, jumped almost 50 percent compared with last year.
There are fears that the departure of the bulk of the US-led NATO troops, who currently number around 75,000, by the end of 2014 will throw the war-torn nation into chaos and insecurity.
"Farmers may have driven up cultivation... trying to shore up their assets as insurance against an uncertain future, which could ensue from the withdrawal of international troops next year," UNODC said.
The report said that in 2013 the area under opium poppy cultivation rose to 209,000 hectares from the previous year's total of 154,000 -- higher than the previous peak of 193,000 hectares in 2007.
Opium production reached 5,500 tons, up by almost half from 2012 but lower than the 2007 high of 7,400 tonnes as bad weather in southern Afghanistan affected crops.
Worth around $950 million, or 4 per cent of national GDP in 2013, the farm-gate value of opium production increased by almost a third.
Together with profits made by drug traffickers, the total value of the opium economy within Afghanistan was significantly higher, the report said, suggesting the illicit economy will grow further while a slowdown of the legal economy is predicted in 2014.
"What is needed is an integrated, comprehensive response to the drug problem, embedded in a long-term security, development and institution-building agenda," UNODC executive director Yury Fedotov said.
Despite the presence of tens of thousands of foreign troops since the US-led invasion ousted the Taliban in 2001, Afghanistan remains the world's main producer of opium.
The country produces about 90 percent of the world's opium, and poppy farmers are taxed by the Taliban, who use the cash to help fund their insurgency against the government and NATO forces.
Assisted by its Western allies, Afghanistan has been trying to fight opium cultivation, including eradicating the crop before harvesting, but the efforts have so far met with limited success.
Most of the cultivation takes place in the southern and western provinces where the Taliban insurgency is most active.
In southern Helmand province, Afghanistan's principal poppy-producing region, the area under cultivation rose by a third in 2013, while neighbouring Kandahar, the birthplace of the Taliban, saw a 16 percent rise.
The poppies, which provide huge profits in one of the world's poorest countries, also play a large part in the corruption that plagues Afghan life at every level from district to national government.