The Hutton report also clears the UK government of embellishing its September 2002 dossier on Iraq and its elusive weapons of mass destruction, according to The Sun national newspaper.
The tabloid told its readers it had seen extracts of the conclusions of the report which Lord Brian Hutton is to make public at 1230 GMT on Wednesday. Blair is to make a statement in parliament 90 minutes later.
"There was no dishonourable or underhand or duplicitous strategy by the government covertly to leak Dr Kelly's name to the media," the newspaper quoted Hutton as saying in the report.
Kelly, a respected Ministry of Defence expert on biological weapons, killed himself last July a few days after he was exposed as the source of a BBC radio report in May.
He alleged that Blair's government had "sexed up" a September 2002 dossier on Iraq and weapons of mass destruction. His suicide hurled Blair into one of the worst situations since taking office in 1997.
The Sun said the report criticised BBC reporter Andrew Gilligan for failing to put his story to the Ministry of Defence before airing it.
It added that Hutton's 320-page report largely cleared Defence Secretary Geoff Hoon of wrongdoing. Political analysts have been expecting Hoon to take the fall for the Kelly affair.
Blair aide Alistair Campbell left his
job but is cleared by Hutton
"The decision by the MoD to confirm Dr Kelly's name was not part of a covert strategy to leak his name, but was based on the view that it would not be sensible to try to conceal his name."
Speaking on BBC radio, The Sun's political editor Trevor Kavanagh said his newspaper had seen "extracts from the conclusions" of Hutton's report. He did not disclose how they were obtained.
But a few copies of the report were given to key players in the Kelly affair, including Blair's government, Kelly's family, the BBC and Gilligan, after they promised in writing not to disclose the contents.
Hutton had concluded that Kelly was to blame in the first place for contacting journalists such as Gilligan to discuss the September 2002 dossier - a key part of Blair's effort to get British public opinion behind the US-led campaign to overthrow Saddam Hussein's government.
"His meeting with Mr Gilligan was unauthorised and, in discussing intelligence matters with him, Dr Kelly was acting in breach of the civil service code of procedure," Hutton reportedly wrote.
BBC journalist Andrew Gilligan and
the broadcaster itself are criticised
But Hutton absolved Dr Kelly for the way in which his remarks were reported by the BBC.
Gilligan at fault
“... I am satisfied Dr Kelly did not say the Government probably knew or suspected the 45-minute claim was wrong before the claim was inserted in the dossier.
“The allegation reported by Mr Gilligan that the Government probably knew the claim was wrong or questionable was unfounded.
“In the context of the broadcasts in which the ‘sexing up’ allegation was reported, I consider that allegation was unfounded,” he is quoted as having written.
Gilligan, in a Mail on Sunday column after his 29 May broadcast, had fingered Alistair Campbell as the man responsible for supposedly embellishing the dossier. The report clears Campbell, the PM's ex-director of communications and strategy.
The BBC came in for sharp criticism from Hutton, a former chief justice of Northern Ireland.
He reportedly faulted BBC executives for failing to properly investigate the allegations in Gilligan's report, and for not taking Downing Street's denials seriously in the weeks before Kelly took his life.
"The governors (of the public broadcaster) are to be criticised for failing to make a more detailed investigation into whether the allegation by Andrew Gilligan was properly supported by his notes.
"They failed to give proper and adequate consideration to whether the BBC should publicly acknowledge that this very grave allegation should not have been broadcast."
Speculation is rife that the BBC may take disciplinary action against Gilligan, a turn of events that may lead to a reaction from the National Union of Journalists, the UK's biggest journalist's union.