The commission released its 123-page report on Monday, one month before the July 6 vote on the Games venue in Singapore, and said the Paris and London bids were of "very high quality".
New York and Madrid had made "high quality" presentations, it said. Moscow was criticised for a lack of detailed planning.
London bookmakers cut London's odds to 11-4 from 3-1. Paris remains strong favourite to stage the Games at 1-4. Beijing will host the 2008 Games.
The commission praised Paris's excellent accommodation proposal, high capacity and quality road and rail transport systems plus its "well-documented and achievable" budget.
London's budget was "well-supported and achievable" and its bid "indicated a high level of planning".
There was a cautionary note regarding London's transport system, however, and the size of the Olympic Park project.
The report said transport demands would be met in London providing "the substantial programme of public transport improvements is fully delivered before 2012".
"We are in good shape to take the battle even harder and further towards our goal," Sebastian Coe, former double Olympic champion and chairman of London's bidding committee, told a news conference in London.
Paris mayor Bertrand Delanoe told a news conference: "We have 30 days left to prove that we deserve the honour to host the Games. And this is what my staff and myself are going to work to."
The commission expressed some reservations about the New York, Madrid and Moscow bids.
For New York the report said "the Olympic Stadium... essential to the hosting of the Games, (was) still in progress at the time of the commission's visit and no guarantees were provided that (it) would be available for the construction of Olympic infrastructure."
Later on Monday, a New York state panel rejected a $1.9 billion plan to build a new Manhattan stadium, clouding New York's hope of landing the Olympics.
Madrid was criticised over a lack of hotel rooms close the Games venues. "Madrid may need to use hotels in cities approximately one hour away in order to meet Olympic requirements," the report said.
The Spanishcapital, however, was extremely confident of victory, saying it would have won if the evaluation commission had awarded points.
"We are totally convinced that today we are top-ranked of all the cities bidding for the Games," Madrid mayor and bid leader Alberto Ruiz-Gallardontold a news conference.
"Ouronly regret is that the commission didn't give points rankings to each city as they did last time as we believe we would have come top."
Moscow'ssummary said "a lack of detailed planning in the candidature file ... made it difficult for the commission to evaluate the project."
"Ourtask in the next month ... is to convince everyone that we would put on the Games better than anyone else and that we need these Olympics more than others," Moscow bid chief and the city's vice mayor, Valery Shantsev, told reporters.
'NECK AND NECK'
Monday's report will be sent to the 114 voting members of the IOC, 100of whom will be eligible to vote.
The evaluation commission staged a whistle-stoptour of London, Madrid, Moscow, New York and Paris in February and March.
Thereport is intended to be a guide to the voting members and none are obliged to abide by any of its recommendations.
Dan Doctoroff, New York City deputy mayor and NYC2012 founder, said:"We are absolutely delighted by the IOC's Evaluation Commission report today.
"Thereport makes clear that this race is neck and neck and that New York is firmly in the top tier. The IOC report has made crystal clear that we're in a great position to win in Singapore on July 6, so long as the stadium is approved."
"Youcan't have a glaring weakness in your most important venue and expect to triumph," Doctoroff told a teleconference.
Aunanimous vote by the city's Public Authorities Control Board was required to approve the stadium, which would have held opening and closing ceremonies plus track and field events.
Thestadium was also meant to become home to the National Football League's New York Jets.
"Thisis an unfortunate day for anyone who believes New York City should continue to build upon its bright past," Jets President Jay Cross said after the stadium plan was rejected.
NewYork's Olympic bid committee made no immediate comment on the vote.
(Additional reporting by Larry Fine)