Conditions are so bad that healthy people are getting ill after they arrive, said Medecins Sans Frontieres.
There is only one toilet for every 3,000 residents and new arrivals having to build their own shelters, it said.
The UN said it was taking the allegations seriously, but questioned some of the findings in the report.
The UN refugee agency UNHCR, which oversees the camp, said some of the facts "seem to be out of date and do not reflect current realities" - pointing out that there are now more than 2,500 latrines, approximately one for every 30 refugees.
Some 70,000 refugees now live at the Mbera camp in a remote part of Mauritania, MSF said, put off from returning home by enduring ethnic tensions in northern Mali.
"More than 100,000 people  from northern Mali are currently displaced within their country or have escaped abroad as refugees," said Henry Gray, emergency co-ordinator for MSF.
"Most of the refugees are from the Tuareg and Arab communities. They fled pre-emptively, often for fear of violence due to their presumed links with Islamist or separatist groups. Their home in northern Mali is still in the grip of fear and mistrust."
The situation at the camp has worsened, MSF said, since France led a military intervention in Mali in January.
The MSF report, Stranded in the Desert, is based on testimony from more than 100 residents of the Mbera camp.
Refugees are receiving only 11 litres (2.9 gallons) of water a day in 50C (122F) heat, and there is a desperate shortage of toilets, though acknowledged more are now being built.
An MSF study at the camp last November revealed a critical nutrition situation, with mortality rates above the emergency threshold for children under two years old.
And conditions have worsened since the French intervention in Mali prompted a fresh wave of 15,000 refugees.
New arrivals are having to wait more than a month to receive housing materials, and are having to build makeshift shelters from sticks and scraps of cloth.
"The number of consultations in MSF's clinics in the Mbera camp has increased from 1,500 to 2,500 per week," MSF said.
"The number of children admitted per week for severe malnutrition has more than doubled, from 42 to 106, despite the nutritional status of the new refugees being generally good when assessed on arrival in the camp."
MSF said the situation had improved in recent weeks.
But it is urgently calling on the UNHCR and aid organisations operating inside the camp to redouble their efforts to provide shelter, clean water, latrines, and food at minimum humanitarian standards.
The fear is that unless conditions in the camp improve significantly, the refugees - most of whom are nomads - will abandon it, but will be unable to return home due to the ongoing conflict, says the BBC's Africa analyst Mary Harper.
The UNHCR said it was studying the report in detail.
"The issue of malnutrition in Mbera camp is a major concern and has been for some time... We take the allegations in the report seriously," said UNHCR spokesman Dan McNorton.
"However, some of the facts contained do now seem to be out of date and do not reflect current realities."
He said that as well as the increase in toilets at the camp, there are also more than 570 water points and more than 1,500 showers.
The agencies operating in the camp have "already taken measures to improve the overall hygiene" and "additional efforts have been in place since the beginning of the year to treat malnutrition issues responding to this critical situation," he added.
Thousands of refugees fleeing conflict in Mali are enduring "appalling" conditions in a UN-run camp in Mauritania, a medical charity warns.