The Office of Government Ethics (OGE) found reason to believe Ms Conway had violated ethics rules, five days after she urged people to buy the president`s daughter`s range on Fox News.
Her comments prompted complaints from both Democrats and Republicans.
They have now been backed by the OGE, which is an independent body.
In a letter on Tuesday, it advises the White House to investigate and possibly discipline Ms Conway.
It adds pressure to the Donald Trump`s administration, in a week where national security adviser Michael Flynn was forced to step down over his contact with the Russian ambassador.
The White House has so far stood behind Ms Conway, who urged people to "go buy" after retailer Nordstrom dropped Ivanka`s clothing line, citing a lack of sales.
Press secretary Sean Spicer did say she had been "counselled" following the incident but the OGE letter said it had received no notice of "disciplinary or any other corrective action" against Ms Conway.
"There is strong reason to believe that Ms. Conway has violated the Standards of Conduct and that disciplinary action is warranted," the letter notes.
Ethics rules state officials cannot use their position for personal gain. The letter says there is no doubt she appeared on television in her official capacity, as she sat in front of the White House seal and next to an American flag.
It recommended the investigation and any disciplinary action be taken by 28 February.
Kellyanne Conway: Call for ethics inquiry over Ivanka Trump promotion
15 February 2017
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Senior White House adviser Kellyanne Conway should be investigated over her promotion of Ivanka Trump`s products, a government ethics advisory body says.
