The scathing report also found the FBI attempted to impede the congressional investigation into the long-running scandal.
"Beginning in the mid-1960s, the Federal Bureau of Investigation began a course of conduct in New England that must be considered one of the greatest failures in the history of federal law enforcement," the House Government Reform Committee report said. "The Justice Department made it very difficult for this Committee to conduct timely and effective oversight."
It went on to say that the panel's two-year investigation makes it clear "that the FBI must improve management of its informant programs to ensure that agents are not corrupted. The committee will examine the current FBI's management, security, and discipline to prevent similar events in the future."
The FBI said Thursday it had taken significant steps to improve the use of informants, who it said are vital to investigations, including terrorism threats.
"While the FBI recognizes there have been instances of misconduct by a few FBI employees, it also recognizes the importance of human source information in terrorism, criminal and counterintelligence investigations," the agency said in a statement.
The committee also concluded there is not enough evidence to find that former University of Massachusetts President and State Senator William Bulger used his political authority to punish those who investigated his brother, mob boss James "Whitey" Bulger, who is sought in connection with 21 murders.
Whitey Bulger, a former FBI informant, fled in 1995 and is on the FBI's 10 Most Wanted List.
William Bulger received immunity to testify in front of the committee earlier this year, and the report noted some inconsistencies between his testimony and others.
The report is the latest development in a cascade of indictments and guilty pleas connected to the long-running scandal over the FBI's relationship with its underworld informants.
While it broadly condemns the FBI's practices, the report focuses on one case — the 1965 murder of Edward "Teddy" Deegan — and law enforcement efforts to protect FBI informants Jimmy "The Bear" Flemmi and Stephen "The Rifleman" Flemmi.
Stephen Flemmi recently pleaded guilty to racketeering charges involving 10 murders.
Last year, former FBI agent John Connolly Jr. was convicted of protecting gangsters, including Whitey Bulger.
The House committee reports there is evidence that high officials, including perhaps long-time director J. Edgar Hoover, knew about efforts to make Jimmy Flemmi an informant.
The committee slams a 1997 internal FBI review that found "no prosecutorial discretion" was exercised on behalf of Whitey Bulger or Stephen Flemmi. It claims the FBI claimed executive privilege over documents central to the congressional probe, took too long to produce some material and made too many redactions in the documents it did turn over.