Ikea has said it "deeply regrets" the use of political prisoners as forced labour in communist East Germany by some of its suppliers.
The Swedish furniture giant asked accountants Ernst & Young to look into the matter, dating back 25-30 years.
The study indicates that political and criminal prisoners were involved in manufacturing for Ikea suppliers.
It also said that Ikea representatives at the time knew that political prisoners were possibly used.
In the past Ikea had given contracts to the East German (GDR) government.
Former political prisoners of the Stasi, the feared secret police, said they worked on the furniture, leading to Ikea commissioning the Ernst & Young report in May this year.
Those former prisoners may now expect compensation.
Rainer Wagner, chairman of the victims' group UOKG, has previously said that Ikea was just one of many companies that benefited from the use of forced prison labour in the former GDR from the 1960s to 1980s.
The group is campaigning for compensation for many former prisoners, whom they say carry psychological and physical scars from the labour they were forced to do.
"Ikea has taken the lead on this, for which we are very grateful," Mr Wagner told a news conference in Berlin, where the findings of the report were presented.
Jeanette Skjelmose, Ikea's sustainability manager, said: "We deeply regret that this could happen. Using political prisoners in production has never been accepted within the Ikea Group."
She told the BBC that Ikea had met UOKG and had agreed "to financially support their investigation to go further and look at the whereabouts and situation for political prisoners in general in Eastern Germany".
The company said that although it took steps to try to ensure that prisoners were not used in production, "it is now clear that these measures were not effective enough".
Ms Skjelmose added that Ikea now had one of the most rigorous codes of conduct for suppliers and this, together with close co-operation with suppliers and external inspections, effectively reduced the risk of something similar happening again.
She said the company carried out more than 1,000 audits every year to make sure suppliers were complying with its code of conduct.
Ernst & Young looked at 20,000 pages of documents from Ikea's internal records and 80,000 archived items from German federal and state archives.
They interviewed about 90 people, both current and former Ikea employees and witnesses from the former GDR.
"Ikea had contracts with GDR Enterprises to produce their furniture here," said Dr Hubertus Knabe, director of the Stasi Prison Memorial, a former prison that has been turned into a museum.
"They didn't ask who were producing their furniture and under what kind of conditions," he said prior to the report being published.
"In each case you are responsible [for] with whom you are dealing and if you are dealing with dictatorship, if you don't have a look under what kind of conditions your furniture is produced, then you are responsible for that."