An Iraqi man died after suffering an "appalling episode of serious gratuitous violence" in a "very serious breach of discipline" by UK soldiers, a year-long inquiry has found.
Its chairman, Sir William Gage, blamed "corporate failure" at the Ministry of Defence for the use of banned interrogation methods in Iraq.
Baha Mousa died with 93 injuries in British army custody in Basra in 2003.
Prime Minister David Cameron said such an incident should never happen again.
"The British Army, as it does, should uphold the highest standards," he said.
"If there is further evidence that comes out of this inquiry that requires action to be taken, it should be taken."
In a statement to the Commons, Defence Secretary Liam Fox said the Army had been guilty of systematic failures but he rejected one of the 73 recommendations of the inquiry's 1,366-page report - that soldiers should not be allowed to shout during interrogations.
He said such actions would only be used in future to "secure swiftly, in appropriate circumstances, the intelligence that can save lives".
Mr Fox added: "What happened to Baha Mousa and his fellow detainees in September 2003 was deplorable, shocking and shameful...
"It was avoidable and preventable, and there can be no excuses. There is no place in our armed forces for the mistreatment of detainees. And there is no place for a perverted sense of loyalty that turns a blind eye to wrongdoing or erects a wall of silence to cover it up."
The head of the Army, General Sir Peter Wall, said the "shameful circumstances" of the innocent civilian's death cast a "dark shadow" over the reputation of the service.
He said moves to introduce recommendations of the report were "well advanced".
Sir Peter added that the incident took place at a time the Army faced "hostile and intense" challenges but there could be "no excuses".
Mr Mousa was arrested, along with nine other Iraqis, at the Haitham Hotel in Basra on 14 September 2003 by members of the 1st Battalion The Queen's Lancashire Regiment (1QLR).
Sir William said a "large number" of soldiers assaulted Mr Mousa and the other detainees, and he added that many others - including several officers - must have known what was happening.
He condemned members of the battalion for their "lack of moral courage to report abuse".
He added the death was a "very great stain on the reputation of the Army, and no doubt they did at the time greatly damage some of the good work done by 1QLR and other units in Iraq".
Among Sir William's other recommendations were a call for:
- Standard orders to be issued ahead of each military operation clarifying that the use of five specific interrogations techniques was banned
- Medical personnel to be more involved in providing advice that captured persons were not fit for detention or questioning
- Greater clarity in training in relation to "restraint positions". More must be done to give "practical guidance" to help personnel distinguish between unlawful stress positions and "legitimate use of force to effect a search, or an arrest or prevent assault or escape"
- Training to include a warning that conduct that can be expected of a non-Geneva Conventions compliant enemy does not reflect the standards required of British and Nato forces
Mr Mousa, a father-of-two, died two days after his arrest.
The inquiry concluded that the death was caused by a combination of his weakened physical state and a final bout of abuse.
Cpl Donald Payne had violently assaulted Mr Mousa in the minutes before he died, punching and possibly kicking him, and using a dangerous restraint method, the inquiry found.
While this was a "contributory cause" in the death, Mr Mousa had already been weakened by factors including lack of food and water, heat, exhaustion, fear, previous injuries and the hooding and stress positions used by British troops.
Sir William said Payne was a "violent bully" who inflicted a "dreadful catalogue of unjustified and brutal violence" on the detainees, also encouraging more junior soldiers to do the same.
His abuse included striking each of the detainees in turn in order to elicit cries of pain and create a "choir" effect.
Payne became the first member of the British armed forces convicted of a war crime when he admitted inhumane treatment at a court martial in 2007. He was jailed for a year and dismissed from the Army.
While it was accepted that commanding officer Col Jorge Mendonca was unaware of the abuse, Sir William said: "As commanding officer, he ought to have known what was going on in that building long before Baha Mousa died."
Sir William found that two officers, Lt Craig Rodgers and Maj Michael Peebles, had known that the detainees were being subjected to serious assaults by more junior soldiers.
He said there was a " very serious breach of duty" on the part of Lt Rodgers, who was in charge of the soldiers guarding the prisoners for most of their detention, for not intervening or reporting up the chain of command.
"If he had taken action when he first knew what was occurring, Baha Mousa would almost certainly have survived," Sir William said.
He also accused battalion padre Father Peter Madden of ignoring "the shocking condition of the detainees".
The inquiry also considered why interrogation methods that had been banned by the UK more than 30 years earlier were being used during the Iraq campaign.
In 1972, following an investigation into treatment of prisoners in Northern Ireland, then-Prime Minister Edward Heath banned the use of hooding, white noise, sleep deprivation, food deprivation and painful stress positions - known as the "five techniques".
But knowledge of this ban had "largely been lost" by the time of the Iraq war, and "there was no proper MoD doctrine on interrogation of prisoners of war that was generally available", Sir William found.
"I conclude that this came about by a corporate failure of the MoD," he said.
The inquiry found that use of hooding and stress positions on suspected Iraqi insurgents had become "standard operating procedure" among 1QLR soldiers.
Mr Mousa was hooded for nearly 24 of the 36 hours he spent in British detention.
Following publication of the inquiry report, Phil Shiner, lawyer for Mr Mousa's family, said: "At the heart of this is the death of Baha Mousa. Sir William makes it clear that this cannot be explained away as being simply the act of a few rogue soldiers.
"His report provides a detailed analysis of how hooding, stress positions, sleep deprivation, noise disorientation and minimal food and water ultimately contributed to Baha dying in British custody."
Lord Goldsmith, the attorney general in 2003, told BBC Radio 4's World at One programme that MoD lawyers had not contacted his department for advice over the use of the techniques used by British soldiers on Mr Mousa.
Had he been asked, he would have advised them that they were outlawed, he said.
Mr Mousa's 22-year-old wife had died of cancer shortly before his detention, meaning his death left his two young sons, Hussein and Hassan, orphaned.