The surprising move suggests that the divisions that hobbled the Security Council in debating war against Iraq might narrow as the discussion turns to postwar policy.
Last week President Bush called for sanctions to be lifted quickly so Iraq's oil revenue can be used to finance reconstruction.
France's U.N. ambassador, Jean-Marc de La Sabliere, made the proposal at a Security Council meeting where members heard a briefing by chief U.N. weapons inspector Hans Blix and for the first time exchanged views on potentially divisive post-war issues.
France was in the forefront of opposition to the U.S.-led war against Iraq, along with Russia, Germany and China. But de La Sabliere said before the meeting that Security Council "must take into account the new realities on the ground."
Russian Ambassador Sergey Lavrov had said his country is "not at all opposed to the lifting of sanctions."
But he said Russia wants U.N. inspectors to certify that Iraq has been disarmed of all weapons of mass destruction, as required under U.N. resolutions.
He was not immediately available for comment on the French proposal.
The Security Council imposed sanctions after Iraq's 1990 invasion of Kuwait. Under council resolutions, sanctions cannot be lifted until U.N. inspectors certify that Iraq's nuclear, chemical and biological weapons have been destroyed along with the long-range missiles to deliver them.
Blix stressed the council resolutions that call for U.N. inspectors to have access to all sites and people in Iraq. He said he told the council that he believes the world would like Iraq's disarmament confirmed by an international body that has been involved in the country for over 10 years.
The Bush administration, which accused Blix of hindering its drive for international support for the war, has already sent its own teams to Iraq to search for illegal weapons.
"We see no immediate role for Dr. Blix and his inspection teams," Richard Grenell, spokesman for U.S. Ambassador John Negroponte, said Monday.
The Security Council must wrestle not only with Iraq's disarmament but also the U.N. role in Iraq, control of Iraq's oil revenue and lucrative reconstruction contracts.
At another closed-door council meeting later Tuesday, the council was to hear from Benon Sevan, head of the U.N. oil-for-food program, which had been providing food for 60 percent of Iraq's 24 million people.
France's de La Sabliere said he also proposed that the council phase out the oil-for-food program, which allowed Iraq to sell unlimited quantities of oil provided the money went for humanitarian goods and compensation to victims of the first Gulf War.
U.N. inspectors went back to Iraq for the first time in four years in November and discovered no weapons of mass destruction during 3½ months of searching. Secretary-General Kofi Annan ordered all U.N. international staff, including the inspectors, to leave Iraq just before the war began on March 20. He has said he expects them to return.
Annan also said Tuesday in Austria that Iraqis should be in charge of their own future and natural resources. He acknowledged that "the U.N. is being challenged" but said he expected an agreement on the U.N. role in Iraq in the "not too distant future."
Both the United States and Saddam Hussein's regime agree the sanctions have caused suffering among Iraq's people. Saddam attributed many thousands of deaths to the sanctions, and blamed the United States for imposing them. The U.S. pinned responsibility on Saddam for allegedly failing to disarm, and discounted reports of large civilian casualties.
The debate over war with Iraq strained French-U.S. ties more than any incident in 40 years. France argued that inspections were working and threatened to veto a second resolution authorizing war.
Both the U.S. and Britain blamed their inability to pass such a resolution on France's threat.