The recent US Army War College study called the Iraq invasion "unnecessary", and said it has robbed resources and attention from the fight against al-Qaida.
The report by Jeffrey Record, a veteran defence expert, urged US leaders to refocus Bush's war to target Usama bin Ladin's network.
Record criticised the Bush administration for lumping together al-Qaida and President Saddam Hussein's Iraq "as a single, undifferentiated terrorist threat".
"This was a strategic error of the first order because it ignored critical differences between the two in character, threat level and susceptibility to US deterrence and military action," he said.
"The result has been an unnecessary preventive war of choice against a deterred Iraq that has created a new front in the Middle East for Islamic terrorism and diverted attention and resources away from securing the American homeland against further assault by an undeterrable al-Qaida."
In an interview after the report's publication, Record also took issue with the very concept of 'a war on terror'.
"The result (of the war on terror) has been an unnecessary preventive war... that has created a new front in the Middle East for Islamic terrorism and diverted attention and resources away from securing the American homeland against further assault"
US Army War College
"Terrorism is a common noun. It's a technique. How do you make war on terrorism as opposed to specific terrorist organisations?" he said.
"I don't think that it is within America's power to rid the world of terrorism... The idea that you're going to be able to expunge this form of warfare from the world, I think, is really stretching it."
The report will give ammunition to critics who accuse Bush of using the "war on terror" as a pretext to invade Iraq.
Ten months after the invasion US-led forces have yet to find weapons of mass destruction which Bush administration officials claimed could find their way into hostile hands.
Pentagon officials said on Monday that Record was entitled to his opinion, but reiterated Bush's view that Iraq is the "central front" in the war on terrorism.
Lawrence Di Rita, the top Pentagon spokesman, said: ""People are publishing stuff all the time... You learn even from analysis you don't agree with.
But he added: "I don't even want to characterise it as something I don't agree with because I just haven't read it."