BBC | The state - one of the poorest and most isolated in Burma - is home to the Muslim minority Rohingya, who have fled seeking asylum in other parts of Asia.
Their plight has aroused international concern amid allegations of abuse of the Rohingya by the Thai military.
The announcement followed a visit to Burma by the UN High Commissioner for Refugee's chief, Antonio Guterres.
The Rohingyas are denied Burmese citizenship, are subjected to forced labour and barred by the military from travelling without permission.
Mr Guterres visited Sittwe, the capital of Rakhine state, which is close to the Bangladesh border where most Rohingya have settled.
He is also reported to have travelled to Myeik, a south-eastern port town on the Andaman Sea from which many refugees are believed to have fled abroad.
Tens of thousands have fled the poverty and repression in recent years. But many countries, including Thailand, class the Rohingyas as illegal economic migrants and refuse to recognise them as refugees.
Sharpened debate
Mr Guterres concluded that "the UNHCR's current level of activities in northern Rakhine State does not correspond to the actual needs and a decision was taken to upgrade the programme with immediate effect," the UNHCR said.
"It was also agreed that UNHCR and the government would examine the scope for a strengthening of UNHCR activities in the south east of the country," it said, referring to the area worst-hit by Cyclone Nargis last year.
Areas of focus considered particularly important were health, education, water and sanitation, agriculture and infrastructure.
"Frank and open discussions also covered all areas of concern to UNHCR, from prevention of displacement to voluntary return, registration and legal status, and improvements to economic and social conditions," the UNHCR said.
Many countries impose sanctions on military-ruled Burma for its abuse of human rights, detentions of political leaders and its failure to allow democracy.
These sanctions have included constraints on the operation of aid agencies in the country, on the argument that aid will be filtered through military figures and directed towards military needs.
The extent of human distress supports the other point of view, that international groups should extend their involvement in the country.
The recent revelations about the abuse faced by Rohingya in Burma and their difficulties once they escape, have sharpened the debate.
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