Winograd, a former judge, called the month-long conflict a "great and grave fumble" that ended without clear victory and that the army was unable to prevent Hezbollah firing rockets into Israel.
Delivering the findings of the report in Jerusalem on Wednesday, Winograd said the Israeli army was "not prepared" for a last-minute ground offensive during the 36-day war in the summer of 2006, "failed" in its mission and that political and military leaders bear responsibility.
The ground assault was ordered even as a UN truce was being formulated to end the war.
The conflict killed up to 900 civilians and 300 fighters on the Lebanese side, and 159 soldiers and civilians on the Israeli side.
Olmert had previously said he did not intend to resign over the Winograd commission's findings and survived a similarly scathing interim report nine months ago.
Political aides had earlier said he was "satisfied" with the conclusions.
Focus on military
David Chater, Al Jazeera's correspondent in Jerusalem, said that the main weight of failure in the report fell on the Israeli military.
He said Olmert will hang on to the positive aspects of the report, which included highlighting UN Security Council Resolution 1701 - which effectively ended the war and kept the northern border with Lebanon quiet - as a milestone in diplomatic terms for Israel.
Olmert is now in a position where he feels, in the end, he has rectified the mistakes, and he has learnt the lessons from the war, making him the man to stay in power, Chater said.
Chater said the main point is that Olmert feels an early election is not necessary because that might derail the fragile peace track that has begun with Mahmoud Abbas, the Palestinian president.
Furthermore, Chater said, Olmert was worried that Ehud Barak, leader of the Labour party, might pull out of the governing coalition.
However, opinon polls in Israel have shown that if there is an early election, the opposition Likud party would likely gain power, giving Barak reason not to move against Olmert.
Political 'flak jacket'
Chater said Olmert sees this as a "flak jacket" and enough of a barrier to withstand the recent political storm against him.
Rula Amin, Al Jazeera's correspondent in Beirut, quoted Mohammed Haidar, a Hezbollah MP, as saying that "the findings of the report make it clear that the choice to resist and the will to fight are the only way to bring results".
For Hezbollah the Winograd report is another chance to record their victory, that defeating Israel is possible, she said.
Hussein Rahal, a spokesman for the group, told the AFP news agency: "The report confirms what Hezbollah was saying all along: Israel failed completely in achieving its goals and the Israeli army suffered a military defeat at the hands of Hezbollah."
For his part, Hassan Fadlallah, a Hezbollah MP, said that the secret portions "probably hide a lot of political scandals concerning the Arab region and the international community.
"The day will come when these secret passages will be published and the world will then discover who was in league with the Israeli enemy".