Hollande promised in July to hold a national debate with a view to submitting a bill to parliament that would go beyond the current law that bars doctors from assisting suicide.
At the time, the national ethics committee advised the Socialist head of state against letting doctors aid the terminally ill to take their own lives.
Belgium, Luxembourg, Netherlands and Switzerland allow voluntary euthanasia in some form and Hollande pledged in his election manifesto last year to legalise "medical assistance to end one's life with dignity".
On Monday, a panel of 18 people deemed representative of society and appointed by the ethics committee, said medically assisted suicide was a "legitimate right for a patient dying or suffering from a terminal illness, based primarily on informed consent and full awareness".
In July, the ethics committee in July said changing the law would be "dangerous to society" because vulnerable patients might see it as a threat that their lives could be ended before their natural deaths.
The current law passed in 2005 allows doctors to stop prolonging life artificially if terminally ill patients request it and encourages palliative treatments to ease their pain.
Public opinion polls show widespread support for legalized euthanasia in late terminal cases. Hospital staff convicted of helping patients die in recent years have often been given suspended sentences in view of this approach.
The issue gained prominence after an elderly couple committed suicide in a luxury Paris hotel last month leaving a note explaining that they had wanted to die with dignity.
In another challenge to the law, a member of parliament from the Green Party described on television on Sunday how she watched her terminally ill mother die after taking pills.