Inspector General Michael Horowitz found Mr Comey broke "dramatically from FBI and department norms" in handling a probe into Hillary Clinton's emails.
The report also revealed Mr Comey had been using a private email account to conduct official FBI business.
The former attorney general and two FBI agents are also heavily criticised.
The inspector general's findings criticise actions by top FBI and justice department officials before the 2016 election.
He found that while Mr Comey's actions were not the result of political bias, "by departing so clearly and dramatically from FBI and department norms, the decisions negatively impacted the perception of the FBI and the department as fair administrators of justice".
What's in the report?
The 500-page report found "a troubling lack of any direct, substantive communication" between Mr Comey and former Attorney General Loretta Lynch.
But the report also touched on text messages between two FBI officials who later worked on Special Counsel Robert Mueller's investigation into alleged Russian meddling in the US election.
Peter Strzok, who was Mr Mueller's lead agent in Russian inquiry, was having an affair with Lisa Page, an FBI lawyer who also temporarily worked on the Mueller investigation.
When Ms Page asked if Mr Trump would become president, Mr Strzok responded: "No. No he won't. We'll stop it."
The report called this "not only indicative of a biased state of mind but, even more seriously, implies a willingness to take official action to impact the presidential candidate's electoral prospects".
Republicans have seized on the messages to argue the FBI investigation was biased against President Donald Trump.
The report also criticised Mr Comey's decision to reveal publicly a week before the election that he had reopened the inquiry into Mrs Clinton's emails.
The inspector general rejects Mr Comey's claim he was acting in the interests of transparency and faults him for "an extraordinary departure from these established norms, policies, and precedent".
What about Comey's emails?
Potentially embarrassing for the former FBI director is the inspector general's finding that he used a private Gmail address to conduct some official business.
This practice continued while he was investigating Mrs Clinton for using a private email account to handle government secrets - which at the time Mr Comey branded "extremely careless".
When asked about his own email by investigators, Mr Comey said: "I had the sense that it was OK."
He said he only handled non-confidential information on his Gmail, and it was only used for information that would become public anyway, such as speeches or public statements.
But the inspector general said it was "inconsistent" with justice department policy.
Why was there a report?
In announcing the review in January 2017, Mr Horowitz said there was overwhelming demand from lawmakers, members of the public, and "various organisations" to investigate claims of unprofessional behaviour on the part of the justice department and FBI employees.
President Trump is among the most vocal critics of the FBI and the Department of Justice, repeatedly accusing several employees of being biased against him.
The report focuses on Mr Comey's decision in July 2016, then FBI director, to hold a news conference announcing that Mrs Clinton would not be criminally charged for using a private email server for classified information during her time as US secretary of state.
Eleven days before the presidential election, Mr Comey announced that the bureau was investigating new emails related to the Clinton email probe.
Mrs Clinton and her aides have blamed Mr Comey for her election loss to Mr Trump while Democrats pointed out that he remained silent at the time about an investigation into possible collusion between Russia and the Trump campaign.
Mr Trump's decision to fire Mr Comey in May 2017 led the Department of Justice to appoint Mr Mueller, an ex-FBI director, to open an investigation into the Russia allegations.
Mr Trump has repeatedly denied any collusion with the Kremlin, calling the Russia investigation a "witch hunt".
What's the reaction?
On Thursday, the president took to Twitter to brand allegations of collusion as "phony" and "garbage".
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