Sir John Elvidge, Permanent Secretary from 2003 to 2010, who latterly worked with SNP First Minister Alex Salmond in his Government, said the issue risked people being defined and divided according to whether they voted Yes or No.
He said such a split could become wider if there were further referendums on other constitutional issues in the event of a No vote next year.
He also warned the debate about self-government could lead to Orkney and Shetland, which are agitating for more powers, removing themselves and their oil wealth from Scotland.
However, Sir John added that, if there was a vote in favour of independence, the "benign gaze" of the international community would ensure Scotland was not short-changed by London over the division of the national debt.
The former head of the civil service north of the Border added this was because the rest of the world would not want a newly independent Scotland to be a liability.
Sir John said: "Various international partners have no interest in inequitable economic outcomes.
"One might think that Europe and the rest of the world had enough limping economic passengers without wishing to see any more created."
Although Sir John didn't predict the result, he told peers about the possible aftermath if there was a No vote on September 18, 2014.
He added: "This is, at present, a polarised and divisive debate.
"I'm not sure what legacy we should be left with in Scottish society at the end of this process, particularly if it becomes more polarised and aggressive as we move towards the referendum.
"A Scotland in which everyone was defined by which side they were on a particular day ... is not, I think, anyone's definition of a healthy, modern society."
He said if Scotland voted against the move, it would inevitably reflect on whether the referendum had been a positive and healthy process.
Sir John added: "My own view is that the risk of damage from repetition of these processes to the fabric of society, a society which wishes to remain fully inclusive, is considerable."
He also contradicted a repeated warning from the Yes camp that a No vote would see Westminster ignore calls for greater devolution.
Sir John said there was clearly popular support among Scots for more powers for Holyrood, also known as Devo Max, and if that was what people wanted after a No vote it would be wrong to assume Westminster would veto it.
He said: "One would expect discussion of Devo Max to continue. And I wouldn't expect the UK Government to be enormously exercised about such an outcome."
Asked if Orkney and Shetland might secede from Scotland, Sir John said it was not fanciful given the nearby undeveloped oil and gas reserves.
He said: "If Greenland can separate from Denmark, there's no obvious reason to suppose that this is an absurd hypothesis.
"Once you've opened the principle of deconstructing the UK, it's not obvious that you can stop that debate at a given point. So one to watch, I think one might say."
In response, a spokesman for the pro-UK Better Together campaign said: "We would absolutely agree with Sir John. This issue has to be settled once and for all. The prospect of constant debate and votes on the constitution will fill people with horror."
For the pro-independence camp, a Yes Scotland campaign spokesman said: "We have a collective responsibility to make this a process and a debate Scotland can be proud of and, if we do, Scottish society will move forward united regardless of the result.
"Sir John's words should encourage us to think about the sort of country Scotland can and should be and to make that the focus of discussion in the year ahead."
His comments surfaced in a newly released recording of a recent talk to the All-Party Parliamentary Group on the Constitution at the House of Lords.