The attack on the oil installation left 74 Ethiopian and Chinese civilians dead.
Georgette Gagnon, HRW's director for Africa, said in a statement: "The Ethiopian army's answer to the rebels has been to viciously attack civilians in Ogaden."
The army is said to have forcibly displaced entire villages, destroyed homes and executed at least 150 civilians.
HRW says that some executions were carried out publicly to terrorise communities.
The army is also accused of capriciously detaining hundreds of people in military bases.
The report quotes witnesses who say that villages were razed to the ground and people beaten with rifle handles and barrels.
"It lasted for more than an hour. They tied both my legs and lifted me upside down to the ceiling with a rope and kept beating me more saying I had to confess," one witness said.
"For two months we underwent this same ordeal."
However, Bereket Simon, special adviser to Ethiopian prime minister Meles Zenawi, dismissed the report saying that HRW had founded its claims on ONLF propaganda.
"Human Rights Watch is engaged in misinforming the public based on the information of the ONLF, whose forces have been destroyed by the actions of the Ethiopian government," he said.
"They don't have any representative on the ground but have chosen to issue a report on hearsay from the ONLF apparatus."
When questioned about whether the government would launch an investigation Simon said: "How can we investigate lies and innuendoes? How can we try to disprove lies by investigating?''
HRW accused Ethiopia's main donors – the US, UK and EU, who together contribute $2bn of aid annually to the Ethiopian government – of "maintaining a conspiracy of silence around the crimes."
Ethiopia is a key US ally in the Horn of Africa region where al-Qaeda forces are operating.
"The United States is being wilfully blind" Gagnon said.
"Because Ethiopia is viewed as a key ally in the counterterrorism efforts, they are perhaps prepared to look the other way at abuses committed by Ethiopian soldiers.
"Silence is complicity in this case," she said.
|"Because Ethiopia is viewed as a key ally in the counterterrorism efforts, they are perhaps prepared to look the other way at abuses committed by Ethiopian soldiers"|
Georgette Gagnon, HRW's director for Africa
HRW, who undertook the investigation between September and December last year, interviewed more than 100 victims.
The report says that violence has decreased in 2008, but that abuses are continuing.
The US and EU have declined to comment on the situation in Ogadan.
At a news conference in the Kenyan capital Nairobi, HRW said that its information gathering process had been rigorous and that it was "100 per cent confident" about its findings.
They called on Washignton to investigate what they called war crimes to comply with the Leahy law, a human rights stipulation in the US foreign assistance legislation.
The Ogaden is an arid stretch of land the size of Britain on the border with Somalia.
It has a population of about four million people and is being explored for oil and gas.
Fighting has been taking place in the region for more than 10 years as ethnic Somalis there seek greater autonomy or an independent state.
Somalia lost control of the region in a war in 1977.