The Queensland government should not expand the legalisation of prostitution to escort services for fear of encouraging organised crime, an independent regulator has found.

Despite a booming sex industry in the Sunshine State - with adult shops scattered throughout Brisbane suburbs - the Crime and Misconduct Commission report found the level of illegal prostitution was low in Queensland compared with other states.

But CMC chairman Robert Needham said this could change if other parts of the sex industry were legalised, such as out-call prostitution services from licensed brothels and independent "escort services".

"This could include an expansion of the industry which could lead to more organised crime and sex trafficking, as the industry attempted to meet the increased demand for sex workers and the illegal industry competed with the legal industry," Mr Needham said.

In Queensland, sole operators provide legal in-call and out-call prostitution services, licensed brothels provide legal in-call services only, and all other out-call prostitution services are illegal.

The CMC recommended targeting the way illegal prostitution operators advertise their businesses, and addressing strategies used by illegal operators to masquerade as social escort services or sole operators.

Acting Premier Anna Bligh welcomed the CMC's findings, saying they showed the government's sex industry reforms were working.

"Our reforms have worked in reducing illegal activity. This is good news for people in the general community and also for those working in the industry," she said.

The government said it would consider the CMC's 23 recommendations. But the move to not expand out-call services could be a blow to the state's hotel industry, which is suffering from mediocre occupancy levels with the domestic tourism industry in a slump.

The sex industry has become a big earner in the Sunshine State, with the proliferation of sex shops in Brisbane leading to some describing it as the "sex capital of Australia".

Brisbane is catching up with Canberra as Australia's adult-shop capital thanks to Queensland's lack of regulations administering adult stores, which allows them to flourish in suburban shopping malls and high streets.

Queensland's Prostitution Licensing Authority refused to comment on the CMC findings yesterday.