Mr Straw said the release of Ms Suu Kyi, who will spend her birthday "cut off from family, friends and political colleagues", would be a starting point to turning around the human rights situation in the country.
In a statement, the foreign secretary said: "Her treatment by the Burmese authorities is indefensible and I urge them to release her and the 1,300 other political prisoners immediately."
The foreign secretary spoke as the international campaign for Ms Suu Kyi's release intensified ahead of her birthday. Burma Campaign UK, which has called for the UK government to exert more pressure, announced today that it would hold a protest outside the Burmese embassy in London tomorrow. Demonstrations will also be held outside 15 other Burmese embassies and consulates around the world.
Mark Farmaner, campaigns manager of Burma Campaign UK, said it was "pointless" for the government to continue calling for Ms Suu Kyi's release and praising her, "while doing nothing concrete".
He called on the government to pursue targeted sanctions: "It's a decoy to talk of wide sanctions, nobody is calling for those, but we desperately need targeted sanctions against the oil, gas, timber and gem industries, which account for up to 80% of the revenue the regime makes. Around 80% of Burmese people are subsistence farmers."
Ms Suu Kyi has spent almost 10 years off and on under house arrest in Burma, which has been run by a military junta since 1962. The Nobel peace prize winner was due to become prime minister when her National League for Democracy party won elections in 1990, but the junta refused to hand over power. Her current period of house arrest began in May 2003 after the militia attacked her convoy and killed up to 100 supporters.
Speaking a week after a delegation of women led by Glenys Kinnock MEP lobbied the prime minister, Tony Blair, for greater government pressure on Burma, Mr Straw called for a "genuine process of reform and political dialogue [in Burma]".
"Releasing Aung San Suu Kyi is not only a moral imperative but a crucial step to start this process," Mr Straw said. "I remain concerned by the rising level of violence and intimidation in Burma, including the terrorist attacks in Rangoon on 7 May, which killed at least 23 people."
Mr Straw said the government would continue to support the "poorest and most vulnerable people" in Burma, and would work in the region and through the UN to pressurise Burmese authorities.
The government does not block imports from Burma (which are mostly clothes) and has been criticised over the fact that these have more than tripled since Labour came to power in 1997.
Speaking at the Foreign Office, Ian Pearson, minister for trade, said: "As a government we don't want to encourage trade with Burma at all ... [but] we are however conscious of the fact that people in Burma depend on having some form of effective economy."
He said the government was in contact with opposition groups in Burma and they had not been seeking wide economic sanctions.
Mr Pearson admitted that the government was frustrated at how little apparent influence it had with the junta but it was hopeful more influence could be exerted indirectly via other countries in the region.
He said the immediate prospects of improvement in Burma looked bleak but insisted the UK was in the vanguard of efforts to highlight the problems; the UK is the leading EU donor to the people of Burma and is committed to spending at least £7m a year over the next three years on health, education and rural livelihood projects.
The minister, who condemned Burma's "appalling human rights situation", said aid was targeted so as not to help the "generals and their cronies".
The UK and the EU had imposed an arms embargo and took other targeted actions against the regime, including visa bans and asset freezes on senior members of the junta. While some campaign groups have questioned how effective this policy is, Mr Pearson said it was effective. "The generals can not travel to Europe and we know, for instance, that the UK is one of the places they might want to send their children to."
Mr Pearson said some EU members were reluctant to do more. France has been criticised for dealing with Burma, and major French oil firm Total recently defied international opinion and said it would continue doing business with the regime.
Concern over the extent to which Burma's junta feels recognised by the international community has increased as it is due to assume the chairmanship of the Association of Southeast Asian Nations (Asean) next year.
Mr Pearson said the government would have "very serious concerns" if that happened and that it could compromise the UK's relationship with Asean - a position that had been made clear to a number of its member countries.
"There is talk Burma might be persuaded to step aside," Mr Pearson said.
Ms Suu Kyi's late husband, the British lecturer Michael Aris, was diagnosed with prostate cancer in 1997. The Burmese government denied him an entry visa and Ms Suu Kyi remained in Burma, not meeting him again before he died in 1999. She continues to be separated from their children in the UK.
