It says much of British intelligence on Iraqi weapons was unreliable, and that some was based on information from untried agents. And it finds that a key dossier on Iraqi arms omitted vital warnings and caveats about the limits of intelligence.
In particular, Butler says the dossier should not have included a prominent claim that Iraq could deploy some weapons of mass destruction within 45 minutes.
"Language in the [September 2002 Iraq] dossier and used by the prime minister [Tony Blair] may have left readers with the impression that there was fuller and firmer intelligence than was the case. It was a serious weakness that the Joint Intelligence Committee's warnings on the limitation of the intelligence were not made sufficiently clear in the dossier," Butler said.
The report says the government wanted that dossier to support the argument for tougher -- though not necessarily military -- action against Iraq. And it says this "put a strain" on the Joint Intelligence Committee, which drew up the dossier.
But the report says the government of Prime Minister Tony Blair did not deliberately mislead the public.
"We found no evidence of deliberate distortion or of culpable negligence nor, for that matter, of assessments being influenced by the policy concerns of senior members of the Joint Intelligence Committee," Butler said.
In his first reaction to the report, Blair said he accepts its findings.
He told parliament that he takes "full responsibility" for any intelligence errors. But he stressed the report did not find his government guilty of exaggerating the Iraq threat.
"No one lied. No one made up the intelligence. No one inserted things into the [September 2002 Iraq] dossier against the advice of the intelligence services. Everyone genuinely tried to do their best in good faith for the country in circumstances of acute difficulty. That issue of good faith should now be at an end," Blair said.
Blair also said it is "increasingly likely" no banned weapons will be found in Iraq. But he said he still believes it was right to invade Iraq and topple Saddam Hussein.
"For any mistakes made, as this report finds, in good faith, I, of course, take responsibility. But I cannot honestly say that I believe getting rid of Saddam was a mistake at all," Blair said.
Blair's decision to back the U.S.-led invasion in Iraq was highly controversial in Britain, and his popularity has suffered.
But analysts say today's report is not likely to inflict lasting damage.
Wyn Grant is a politics professor at Warwick University.
"It's going to be embarrassing,” Grant says. “It's going to cause some difficulties for him. But I don't think it's going to be in any kind of way a fatal blow, as has been clear all along. There isn't some kind of silver bullet in there that's going to bring about the end of his premiership."
The Butler report comes amid the continuing failure of U.S.-led forces to find banned weapons in Iraq.
A similar U.S. Senate committee inquiry last week found that American intelligence agencies had also overstated the threat posed by Baghdad.
The Butler Inquiry: Key Points
WHAT IS IT? Prime Minister Tony Blair commissioned Lord Robin Butler, a veteran civil servant, in February to probe the intelligence on Iraq's banned weapons.
WHY WAS IT SET UP? Iraq's possession of weapons of mass destruction was the main reason given by Britain and the United States for going to war last year, but no weapons have yet been found.
Butler's inquiry looked at the accuracy of intelligence on Iraq's weapons up to March 2003. It looks at any discrepancies between the intelligence gathered and what has been found since the war.
THE REPORT'S KEY FINDINGS:
-- Iraq "did not have significant, if any, stocks of chemical or biological weapons in a state fit for deployment, nor developed plans for using them."
-- Validation of intelligence sources since the war has cast doubt on a large number of those sources. Some of the human intelligence about Iraq's weapons was "seriously flawed."
-- The government's desire for a document which it could use to advocate its policy created a climate that "put a strain" on the Joint Intelligence Committee (JIC), which drew up a key 2002 dossier on Iraq's arms.
-- The dossier should not have included the claim that Iraq could fire some biological and chemical weapons at just 45 minutes' notice.
-- The government had no intention to mislead parliament or the public.
HASN'T THERE ALREADY BEEN A SIMILAR INQUIRY?
Yes, the Hutton inquiry, the results of which were made public in January. That looked into the circumstances surrounding the death last year of scientist David Kelly, who allegedly killed himself after being named as the source of a BBC report that the government had exaggerated the threat from Iraq. The Hutton report was critical of the BBC and found Blair had not exaggerated the case for war. But much of the media said the inquiry was a whitewash.
Two parliamentary committees also cleared the British government of exaggerating the threat from Iraq.