UNITED NATIONS, Oct 17 (Reuters) - The United Nations has raised its limit on the number of international staff it can send to Iraq as it tries to expand its operations there, a spokeswoman said on Wednesday.

Meanwhile a new report by U.N. Secretary General Ban Ki-moon distributed said humanitarian conditions in Iraq had worsened, despite the number of civilian casualties falling in September to the lowest number for the year.

U.N. spokeswoman Marie Okabe said Ban had decided to raise the ceiling on the number of international staff allowed to work in Baghdad from 65 to 85, after a Security Council resolution in August urged the world body to boost its role.

The actual number of staff in Baghdad has been around 50, based in the fortified international Green Zone where many government offices are situated. Another 30 U.N. staff are based in Arbil, in the mainly Kurdish north, where violence is much lower.

Ban said in his report he was also looking into establishing a U.N. presence in the southern city of Basra.

"There is now an opportunity that should not be missed," Ban said, urging Iraqi leaders to take advantage of the reduced violence resulting from increased U.S. military operations to make progress on reconciling the country's warring factions.

"Iraqi leaders must act responsibly and not succumb to the vicious cycle of hatred and revenge that threatens the future of Iraq," Ban said.

His report said the number of Iraqi refugees and internally displaced people had risen to 4.2 million, with more than 60,000 people being displaced a month, up from 50,000 a month six months earlier.

"The humanitarian situation in Iraq has worsened during the reporting period," it said. The last report was on June 5.

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