The report by the non-government watchdog group Freedom House said online freedom declined in 36 of 65 countries surveyed.
In some cases, governments use revelations about surveillance by the US National Security Agency to justify efforts to boost their own monitoring of Internet users and to crack down on dissent.
"Countries are adopting laws that legitimize existing repression and effectively criminalize online dissent," the report said.
"More people are being arrested for their Internet activity than ever before, online media outlets are increasingly pressured to censor themselves or face legal penalties, and private companies are facing new demands to comply with government requests for data or deletions."
The lowest score for Internet freedom was in Iran, followed closely by Syria, China, Cuba, Ethiopia and Uzbekistan.
Nineteen countries were rated "free," with the highest scores for Iceland and Estonia. Thirty-one countries were rated partly free and 19 "not free."
But a majority of countries saw declines in freedom.
Forty-one passed or proposed laws to criminalize or limit online speech or to expand surveillance between May 2013 and May 2014, the report said.
"Some countries are saying they need to store data within their own country because of NSA surveillance," said report author Sanja Kelly. "It is an alarming trend."
Since May 2013, the report said, arrests for online speech related to political activity were documented in 38 of the 65 countries, mainly in the Middle East and North Africa.
"Pressure on independent news websites, among the few unfettered sources of information in many countries, dramatically increased," said the report.
"Dozens of citizen journalists were attacked while reporting on the conflict in Syria and anti government protests in Egypt, Turkey and Ukraine.
"Other governments stepped up licensing and regulation for web platforms."
The largest declines in freedom online were in Russia and Turkey, with significant drops in Ukraine, Angola and Azerbaijan.
In Russia, the report cited multiple new laws to block online content and prosecute people for political dissent. In Turkey, Freedom House cited increased censorship, especially of social media.
US Representative Ed Royce, who heads the House Foreign Affairs Committee, praised the watchdog's efforts at a news conference unveiling the report.
"This is a daunting moment for Internet freedom," he said. "Online censorship is becoming much more prevalent... We must not let oppressive governments win."