The service said earlier this year that over 20 million people come to Russia every year as part of a post-Soviet "migration boom", and half of these are in the country illegally.
"According to expert estimates, there are about 10 million illegal labor migrants on Russia's territory," Konstantin Romodanovsky said.
He said migrants evade taxes and duty payments, and that losses were equal to Russia's total budget spending on education and healthcare. The migrants often use quasi-legal money transfer schemes that are also often used for money laundering, he added.
The migration service said earlier that funds transferred by Georgian guest workers to their homeland account for 20% of Georgia's GDP. Illegal money transfers to Moldova make up 30% of the country's GDP, while funds wired to Tajikistan are twice as much as the country's budget.
Since the collapse of the Soviet Union, many people from the Central Asian states have come to Moscow and other major cities in search of employment. The majority find semi-skilled jobs, and are often underpaid. The leaderships of some Central Asian ex-Soviet republics have urged the Russian leadership to improve their citizens' working conditions, and honor their rights on Russian territory.
Facing an acute demographic crisis, Russia, in turn, is interested in bringing unskilled and skilled workers into its labor force but still needs to establish a sound immigration policy.
Some 1.5 million civil cases were filed for violations of migration laws in 2005 and about 57,000 illegal immigrants were deported from Russia that year.
Romodanovsky said the Federal Migration Service is drafting amendments to more than 100 current regulations to rectify the situation.
In early October, President Vladimir Putin ordered the government to introduce quotas on foreign workers by November 15, regulate trade on markets, and set the term for continuous stays of foreigners on visas in the country at not more than 90 days during a six-month period.