However, it absolved Prime Minister Tony Blair's government and the intelligence agencies of "deliberate distortion or culpable negligence."
Blair said he accepted the report's findings and accepted personal responsibility for any errors made.
In a statement to the House of Commons, Blair conceded that it was "increasingly clear" Saddam Hussein had no stockpiles of illicit weapons on the eve of the war. But he insisted the U.S. led military campaign was not a mistake.
"I have to accept, as the months have passed, it seems increasingly clear that at the time of invasion Saddam did not have stockpiles of chemical or biological weapons ready to deploy," Blair said.
But, he insisted, "I cannot honestly say I believe getting rid of Saddam was a mistake at all. Iraq, the region, the wider world is a better and safer place without Saddam."
"No one lied, no one made up the intelligence, no one inserted things into dossier against the advice of intelligence services," Blair said.
Butler's report, echoing the damning findings of, said that Iraq "did not have significant, if any, stocks of chemical or biological weapons in a state fit for deployment or developed plans for using them."
The report said the September 2002 dossier prepared by Blair's government on the Iraqi threat pushed its case to the limits of available intelligence.
"Language in the dossier may have left with readers the impression that there was fuller and firmer intelligence behind the judgments than was the case," the report said.
"The clearest evidence that the British government hadn't got an intention to mislead is that it would have been a very foolish thing to do to say that these weapons were there, when as a result of the war the fact that whether they were or not was going to be established so soon," Butler said at a news conference following the release of his report.
His report repeated the assessment of a previous inquiry that the 45-minute claim was potentially misleading because it was not made clear that it referred to battlefield munitions.
Butler said there was a suspicion the 45-minute detail, mentioned four times in the September 2002 dossier, had been included in the dossier because it was "eye-catching."
However, Butler's five-member committee, which interviewed Blair, senior Cabinet figures and key intelligence officials, said that in general intelligence material had been correctly reported.
"We should record in particular that we have found no evidence of deliberate distortion or of culpable negligence," the report said.
"We do regard it as a failing, a serious failing, in the dossier that there were not the warnings which were in the Joint Intelligence Committee assessments about the thinness of the evidence," Butler told a news conference.
The report supported Britain's controversial claim that Iraq sought to purchase uranium from Niger. The U.N. nuclear watchdog, the International Atomic Energy Agency, said documents supporting the uranium claim were forgeries.
But Butler said Britain had intelligence from "several different sources."
"The forged documents were not available to the British government at the time its assessment was made, and so the fact of the forgery does not undermine it," it added.
The Africa claim was apparently what President Bush was referring to in his 2003 State of the Union speech when he said, "The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa."
The White House eventually retracted that now infamous 16-word allegation, after a former U.S. diplomat revealed that he had traveled to Africa to probe one of the reports of Iraqi attempts to buy uranium, and found little to substantiate it.
The Justice Department is probing whether a White House official broke federal law by naming the diplomats' wife, a CIA officer, to reporters.
The FBI is probing the forged documents.
The Butler report was highly critical of British intelligence-gathering in Iraq.
"Validation of human intelligence sources after the war has thrown doubt on a high proportion of those sources and of their reports, and hence on the quality of the intelligence assessments received by ministers and officials in the period from summer 2002 to the outbreak of hostilities," it said.
The report acknowledged that its conclusions would probably lead to calls for the resignation of John Scarlett, who as chairman of the Joint Intelligence Committee drew up the dossier. He has since been appointed the chief of MI6, Britain's secret intelligence service.
The report, however, said it hoped Scarlett would stay on. "We have a high regard for his abilities and his record," it said.
The informality of the procedures within Blair's government for forming policies on the risks posed by Iraq "reduced the scope for informed collective political judgment," the report found.
Blair has weathered three previous inquiries, all of which cleared his government of misusing intelligence on Iraqi weapons of mass destruction as it built a case for war.
The prime minister's personal ratings have fallen since the war, and newspapers constantly speculate about the end of his run in power. But he remains in a strong position. A recent poll asked whether respondents would rather have Blair or opposition Conservative leader Howard as prime minister, and Blair was favored by 47 percent to 31 percent.
The 45-minute claim has caused the government the most trouble.
In May 2003, the British Broadcasting Corp. claimed Blair's office had "sexed up" the dossier by inserting the detail against the wishes of spy chiefs and probably knew it was wrong.
The man identified as the BBC's source, weapons scientist David Kelly, committed suicide.
Two parliamentary committees — the Foreign Affairs Select Committee and the Intelligence and Security Committee — cleared the government of "sexing up" the dossier. Both said the "jury was still out" on the existence of WMD in Iraq.