Christine Clements, the Queensland deputy state coroner, found that police at Palm Island, about 1,000km north of Brisbane, beat Cameron Doomadgee causing injuries that led to his death.
Her 35-page report was handed to state prosecutors, who will decide whether to charge the police officer accused of landing the fatal blows after arresting Doomadgee for swearing at police while he was drunk.
Clements rejected Senior Sergeant Chris Hurley's assertions that Doomadgee was fatally injured in a fall, and said the officer had been "untruthful" when he denied hitting Doomadgee after arresting him.
She also criticised the initial police investigation into the death and demanded improvements in the way the law deals with Australia's impoverished Aboriginal communities.
Doomadgee, 36, also known by his tribal name Mulrunji, died on November 19, 2004, after being arrested for verbally abusing police as he walked past the scene of a domestic dispute.
Rioting broke out in Palm Island about a week later when an autopsy revealed that he had four broken ribs and his liver had been "cleaved in two" as well as a ruptured spleen before he died in an injury consistent with a powerful blow.
"At the end of the day a decent Aboriginal man died in a police cell, which in this day and age should not be happening"
Angry Palm Island residents torched the police station and the homes of the island's 14 police officers, in a violent attack that only ended when extra officers were flown in from the mainland.
Palm Island has had a troubled history, earning the dubious title of the most violent place on earth outside a combat zone in the 1998 Guinness Book of Records.
Aboriginal groups have long complained about police discrimination, and claimed the Doomadgee case demonstrated institutional racism in the way indigenous communities are policed.
Clements found that Doomadgee's initial arrest was unjustified, saying "he was not a troublemaker and had never been arrested on the island".
She said when Doomadgee was arrested he struck policeman Hurley, and the policeman considered his authority was being challenged.
The deputy coroner found that Doomadgee and Hurley fell to the ground as they entered the island's police cell, after which the policeman repeatedly hit the prisoner in the body.
"I conclude that these actions of senior sergeant Hurley caused the fatal injuries," she said.
Doomadgee's family welcomed the finding and urged the prosecutor's office to charge Hurley.
Mulrunji's cousin Alec Doomadgee said: "If the Queensland government wants to restore faith, trust and pride in the Queensland Police Service, something needs to be done.
"At the end of the day, a decent Aboriginal man died in a police cell, which in this day and age should not be happening."
The Queensland police union said Hurley was the victim of a witch-hunt.
Gary Wilkinson, the union president, said: "This decision by the coroner has dumbfounded us, Chris Hurley has been hung out to dry by her."
Australia's Aboriginal community numbers about 470,000 out of the country's 20 million population.
They have a life expectancy about 20 years lower than the national average and much higher rates of poverty, unemployment and social problems.