The Metropolitan Police Commissioner's report into collusion between the security forces and loyalist paramilitaries also found that military intelligence in Northern Ireland helped to prolong the Troubles.
Sir John Stevens said informants and agents "were allowed to operate without effective control and to participate in terrorist crimes".
The latest report, called Stevens Three, found that members of the RUC and Army colluded with the largest loyalist paramilitary group, the Ulster Defence Association (UDA), to murder Catholics.
Three official inquiries wilfully obstructed and misled
The report, which centres on the murder of Catholic solicitor Pat Finucane in 1989 and Protestant student Adam Lambert in 1987, was delivered to Northern Ireland Chief Constable Hugh Orde on Thursday.
Sir John said: "I have uncovered enough evidence to lead me to believe that the murders of Pat Finucane and Brian Adam Lambert could have been prevented.
"I also believe that the RUC investigation of Pat Finucane's murder should have resulted in the early arrest and detection of his killers.
"I conclude there was collusion in both murders and the circumstances surrounding them."
The overwhelming bulk of the detail has been witheld because of potential future prosecutions.
The Director of Public Prosecutions is considering whether criminal charges should be made against up to 20 Army and police personnel.
A statement issued by the DPP's office said: "The contents of these files which are voluminous will be given careful and expeditious consideration.
"However, it is not possible at this stage to say when any decision as to prosecution will be reached."
After receiving the report, the chief constable said Sir John in his 21 recommendations had stressed the importance of the criminal investigation.
"He confirmed that he had today sent a large file to the Director of Public Prosecutions to decide what to do in terms of criminal charges and whether prosecutions should be brought," said Mr Orde.
He said many of the police officers questioned in the Stevens investigation had since retired.
Mr Orde said he was determined that there would be no collusion under his command.
The Finucane family has always believed the security forces were involved in his murder and have dismissed the report.
His widow, Geraldine, said a full judicial inquiry was the only way to deal with the issue.
WHAT IS COLLUSION?
Wilful failure to keep records
Absence of accountability
Withholding intelligence and evidence
Agents involved in murder
Mr Finucane, a high-profile Catholic solicitor, was shot dead by the UDA in front of his family at his north Belfast home.
The report also considered comments by former government minister Douglas Hogg, who said a month before Mr Finucane's killing that some solicitors were "unduly sympathetic" to the IRA.
The inquiry found that to the extent that Mr Hogg's comments were based on information passed on by police, they were not justifiable and the minister was 'compromised'.
Michael Finucane, the son of Pat Finucane, has called on the prime minister to set up an independent inquiry into his father's murder.
"What needs to be looked is the extent to which it reached back into the Establishment," he said.
February 1989: UDA kill Catholic solicitor Pat Finucane
September 1989: Stevens One - Sir John Stevens appointed to investigate alleged collusion between security forces and loyalist paramilitaries
1990: Stevens offices hit by fire
1992: British agent Brian Nelson says Army knew Mr Finucane was target
1993: Stevens Two - Director
of Public Prosecutions orders further investigation
April 1999: Stevens Three - Sir John Stevens appointed to investigate Mr Finucane's murder
11 April 2003:Nelson killed by massive brain haemorrhage
17 April 2003: Sir John submits report
"Those questions have not been answered in a public fashion and until there is a tribunal of inquiry established I don't believe they will be."
However, Adam Lambert's mother has said she does not think there is a need for any inquiry.
Ivy Lambert said she understood others felt differently but that her family had always supported the police and security forces.
"They were under tremendous pressure at the time and mistakes were made," she said.
The report also says its inquiries were obstructed by police and army officers, and vital evidence was concealed and destroyed.
Since 1989, Sir John Stevens has been investigating allegations that elements within military intelligence and the RUC's Special Branch were colluding with loyalist assassination squads.
During the course of the latest Stevens inquiry, the activities of the Army intelligence Force Research Unit were investigated.
It recruited Brian Nelson as its agent at the top of the UDA.
His role was to gather information on murder targets.
Nelson, who died last week, insisted his handlers knew in advance that Pat Finucane was being targeted.
The Stevens Report said his murder could have been prevented.
The Stevens' investigating teams found obstruction and even harassment from both the Army and elements of the RUC's special branch.
Sir John said a fire at their offices in 1990 was arson and that throughout their inquiries, they were spied on and betrayed by police and Army colleagues.
He added that he is still determined to try to bring Pat Finucane's killers to justice - and he is still investigating just how far up the chain of command the collusion might have gone.
Most computers will open this document automatically. You may need to download Adobe Acrobat Reader to open this PDF document.