They said the next government in 2015 must "urgently address" the role and effectiveness of Terrorism Prevention and Investigation Measures (TPims).
The Joint Committee on Human Rights' report highlighted the risk of someone going missing while under TPims.
The Home Office said the measures were the strongest the courts would allow.
TPims involve restrictions including overnight residence at a specified address, GPS tagging, reporting requirements and restrictions on travel, movement, association, communication, finances, work and study.
By Dominic CascianiHome affairs correspondent, BBC News
By the end of this month six TPim suspects will be free - meaning there is only one man still subject to the monitoring conditions. Given the secrecy around the system, you can never be sure that there isn't another suspect we don't know about.
Control orders - the more restrictive regime that came before TPims - had many opponents who said the house-arrest style conditions were unjust and oppressive.
TPims inherited those critics and attracted more still, including security experts who said the new regime was too lax.
What does seem to be working now is a strategy to intervene earlier by charging suspects with preparing acts of terrorism. This group may include suspects who, at one time, would have been considered for a TPim because of police concerns that they had lots of intelligence but no hard evidence to present to a jury.
The measures were introduced in December 2011 as a replacement for the more restrictive regime of control orders, intended to prevent suspects from engaging in terrorist-related activity.
The report said there were eight TPim notices in force as of November last year, all of which were for British citizens.
But seven of those will have expired by the end of this month, according to the report.
The committee said TPims should be looked at as part of a wider review of counter-terrorism powers.
Its report urged the government "to engage more transparently and substantively" with recommendations of the independent reviewer of terrorism legislation.
The report said: "We are left with the impression that in practice TPims may be withering on the vine as a counter-terrorism tool of practical utility."
The committee concluded that the measures were not "investigative" in any real sense, and suggested they should be known as Terrorism Prevention Orders or something similar.
It said it agreed with the independent reviewer that the very nature of TPims "carries an inherent risk of the subject absconding".
And it recommended that more information about an internal review of TPims - launched after two subjects went missing - be made public.
Mohammed Ahmed Mohamed - who has been linked to the Somali militant group al-Shabab - absconded in November after changing into a burka while visiting a west London mosque.
His case followed that of Ibrahim Magag, who went missing in December 2012 in a black cab after ripping off his electronic tag.
Committee chairman Hywel Francis said: "There is no evidence that they serve any investigative function and even as preventive measures they seem to be going out of favour with the agencies.
"Very few TPims are in operation and almost all of these are due shortly to lapse after their two-year duration."
Mr Francis said there is too little information known about the individuals on whom these measures have been imposed to make a proper judgement about whether the power to impose them is "no longer required".
"The next government will need to look again at these measures within the context of counter-terrorism powers more generally," he added.
David Anderson, the independent reviewer of terror legislation, told BBC Radio 4's Today programme TPims were "a necessary evil".
"One thing it shows is that police and prosecutors are doing their job," he said.
"We've had a lot of convictions over the last couple of years, a lot of guilty pleas and a lot of heavy sentences."
TPims "don't present a long-term solution", he added.
Home Secretary Theresa May said TPims would also help the authorities gather material that would lead to prosecutions.
But the committee said it "failed to find any evidence" the measures had led to more suspects being charged.
TPim restrictions have been or are about to be lifted from seven suspects, including men allegedly involved in planning terrorist attacks.
The measures were imposed two years ago and cannot be renewed.
A Home Office spokesman said: "TPims were introduced because control orders were not working and their powers were being struck down by the courts.
"They now provide some of the strongest possible protections that the courts will allow."
Restrictions put on terror suspects by the home secretary may be "withering on the vine", a group of MPs and peers has warned.