"The strike occurred because the ground force commander lacked a clear understanding of who was in the vehicles, the location, direction of travel and likely course of action of the vehicles," the report said.
"Information that the convoy was anything other than an attacking force was ignored or downplayed by the Predator crew."
Al Jazeera's Hoda Abdel-Hamid, reporting from Kabul, said people across the country were extremely angry at civilian deaths caused by foreign forces.
"I dont know how much this information, three months after the event, will help," she said.
"Certainly people will be glad to have an admission of guilt, but these things happen again and again. On a national scale, I don't know how much of an impact it will have."
The report paints a damning picture of miscommunication in the hours leading up to the strike, compounded by "poorly functioning" command posts that "failed to properly analyse the situation".
The investigation reveals how the drone operators saw children near the convoy, but went ahead with the strike regardless.
"Two children were spotted near the vehicles, but inaccurate reporting from the crew of the unmanned Predator aircraft to the forces on the ground led the Operational Detachment Alpha [the special forces unit] to believe that the vehicles contained only armed military age males."
The US military said that it was planning to improve its training to avoid further civilian deaths in the country. Four officers had been reprimaded as a result of the findings.
"We must always be honest with ourselves about what we do well and what we can do better," General Stanley McCrystal, the commander of US forces in
Afghanistan, said in a statement released with the report.
Hamid Karzai, the Afghan president, described the incident as "deeply regrettable" and said that he believed that the investigation had been "exhaustive."
"I am also confident that appropriate actions are being taken with regard to those involved in the incident, and most importantly, to ensure measures are taken to prevent such accidents from happening again," he said in a statement.
The US military has come under intense criticism over civilian deaths in Afghanistan and has repeatedly pledged to do all it can to avoid such incidents.