Lord Justice Leveson has called for the Press Complaints Commission to be scrapped and Ofcom to be given a key role in overseeing a new, independent, self-regulatory body.
Under his proposed regime, newspapers would be liable for fines of up to £1m when they are found to have overstepped the mark.
The judge expects publishers to sign up to the system voluntarily - and says "convincing incentives" should be supplied to encourage them to do so.
The new regulator should be governed by an independent board, under the oversight of media watchdog Ofcom, according to his long-awaited report on press standards.
The document stresses that the new body should be appointed in a wholly open and transparent way with no influence from industry or government.
But any involvement of Ofcom will mean new legislation, a move fiercely opposed by the press and many politicians amid fears of restrictions on free speech.
Bob and Sally Dowler arriving to read the report The findings come 16 months after Lord Justice Leveson was asked to investigate the press and after months of evidence from celebrities, politicians, media figures and the police.
David Cameron set up the probe following national outrage at revelations that the News Of The World hired a private detective to hack murdered schoolgirl Milly Dowler's phone.
Lord Justice Leveson said he had overseen the most concentrated look at the British press ever which had laid bare how it had repeatedly flouted its own rules.
He stressed that his aim was not to restrict the freedom of the press but declared: "There must be change."
"There have been too many times when, chasing the story, parts of the press have acted as if its own code, which it wrote, simply did not exist," he said.
Kate McCann at the QEII centre "This has caused real hardship, and on occasion, wreaked havoc with the lives of innocent people whose rights and liberties have been disdained.
"This is not just the famous but ordinary members of the public, caught up in events (many of them truly tragic) far larger than they could cope with but made much, much worse by press behaviour that, at times, can only be described as outrageous."
The judge dismissed the idea that events such as the hacking scandal at the News Of The World were "aberrations that do not reflect the culture, practices or ethics of the press as a whole".
He also criticised editors for failing to be embarrassed at the level of intrusion and highlighted the use of covert surveillance, "blagging" and deception.
"There has been a recklessness in prioritising sensational stories, almost irrespective of the harm that the stories may cause and the rights of those who would be affected," he said.
Celebrities were treated as "fair game" and newspapers adopted a "significant and reckless disregard for accuracy", he added.
He concluded that politicians of all parties had developed "too close a relationship with the press in a way which has not been in the public interest".
He noted that David Cameron went to "great lengths" to woo Rupert Murdoch's News International newspaper empire before the last general election.
He did dismiss the idea there had been any deal of newspaper support in return of policy favours but said the link created a "public perception" problem.
Protesters dressed as David Cameron and Rupert Murdoch However, he found there had been no bias by former culture secretary Jeremy Hunt over the bid by News Corp to take over BSkyB.
The judge exonerated the Metropolitan Police, which has faced criticism for its original investigation into phone hacking in 2006.
He concluded police had made poor decisions that were poorly executed but said the force's integrity was not challenged.
The Prime Minister was handed the 2,000-page report on Wednesday and is now delivering his official response in the Commons.
He started his statement by making clear that victims of press intrusion had "suffered in a way that we can barely begin to imagine".
Mr Cameron also told MPs that the Government accepted the need for more transparency between politicians and the press.
In an extraordinary move, Nick Clegg will also deliver his own statement in parliament once Labour leader Ed Miliband has responded for the Opposition.
The Prime Minister and his deputy held talks this morning to try to hammer out a joint coalition response but it has been decided they will speak separately.
It is an early blow to Mr Cameron after he vowed to try and seek a cross-party consensus on a new regulatory system.
Lord Justice Leveson's report says it is essential that the new regulatory system is supported in law, but stresses that this is different to statutory regulation of the press.
In a stark warning, he warned that Ofcom could be used as a "backstop" regulator if the industry refused to cooperate with his system.
He expressed hope that a cross-party consensus on his recommendations could be achieved but the publication of his report sets the stage for a bitter, potentially long-winded political battle.
MPs on all sides are divided about how to proceed, with many insisting that any form of law governing the press would be a step too far.
Key figures who took part in the inquiry, which has cost the taxpayer up to £6m, gathered at the QEII centre in London today to read the report in advance of its official publication.
They included Bob and Sally Dowler, Kate McCann, actor Hugh Grant, former F1 boss Max Mosley and ex-deputy prime minister John Prescott.
The Hacked Off campaign group, in an initial statement, warned against any attempts to kick the issue into the long grass.
"These proposals are reasonable and proportionate and we call on all parties to get together to implement them as soon as possible. The press must be given a deadline, the inquiry is over, now is the time for action," it said.
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