Rumsfeld had approved "a highly secret operation" last year, which "encouraged physical coercion and the sexual humiliation of Iraqi prisoners in an effort to generate more intelligence about the growing insurgency in Iraq," New Yorker investigative reporter Seymour Hersh wrote, citing current and former intelligence officials.
Excerpts of Hersh's report have been released before publication this week.
The Pentagon said Hersh's report was "outlandish, conspiratorial, and filled with error and anonymous conjecture."
"No responsible official of the Department of Defence approved any program that could conceivably have been intended to result in such abuses as witnessed in the recent photos and videos," Pentagon spokesman Lawrence Di Rita said in a statement.
The New Yorker reported that the clandestine Defence Department operation was known as a special-access programme (SAP).
Its rules were: "Grab whom you must. Do what you want," according to one former intelligence official cited by Hersh.
Rumsfeld's decision to import such techniques into Iraq, after their use in Afghanistan, was opposed by members of US intelligence organisations, the report said.
Use in Afghanistan
"They said, 'No way. We signed up for the core programme in Afghanistan, preapproved for operations against high-value terrorist targets, and now you want to use it for cabdrivers, brothers-in-law, and people pulled off the streets,'" the former intelligence official told Hersh.
The source said the CIA objected to the programme's use inside Abu Ghraib, where a scandal involving the mistreatment of Iraqis has sparked Democratic calls for Rumsfeld's resignation. The CIA ended its SAP involvement in the jail.
Pictures of naked, humiliated
detainees have caused outrage
Leaked photos from Abu Ghraib have shown US soldiers abusing Iraqi inmates, forcing them into sexually humiliating positions.
Hersh writes that Rumsfeld left the detailed planning to Pentagon intelligence chief Steve Cambone, but that the programme was ultimately approved by Rumsfeld and the chairman of the Joint Chiefs of Staff, General Richard Myers.
The Pentagon wanted to use tougher interrogation techniques as the US plan to occupy Iraq was hindered by a growing insurgency, Hersh wrote.
"As far as they're concerned, this is a covert operation, and it's to be kept within the Defence Department channels," the former intelligence official told Hersh.
Hersh is an award-winning US journalist who broke the story of the 1968 My Lai massacre, when US soldiers executed Vietnamese civilians during the war in Vietnam.
"No responsible official
of the Department of Defence approved any programme that could conceivably have been intended to result in
such abuses as witnessed in the recent photos and videos"
Lawrence Di Rita,
Also on Saturday The New York Times reported that the mistreatment of Iraqi inmates at Camp Cropper, near Baghdad airport, predates abuse of Abu Ghraib prisoners by US soldiers.
A prisoner told the International Committee of the Red Cross (ICRC) that he had been beaten by interrogators, hooded, handcuffed, threatened with torture and murder, urinated on and kicked in the head, lower back and groin, the daily said.
He was also kept awake for four days and had a baseball tied into his mouth with a scarf, it added.
The ICRC lodged formal complaints with US officials in February, the Times said, and eventually documented 50 cases of abuse.