Israeli planes attacked the building in Qana in the early hours of Sunday.
The building collapsed and and rescue workers pulled the bodies of civilians – most of them women and children – out of the rubble.
The international outcry after the bombing led Israel to say it would call a halt to its airstrikes in Lebanon for 48-hours.
In a statement summarising the inquiry, the Israeli military admitted that they had made a mistake but said that Israel did not know that there were civilians in the building.
The statement said: “Had the information indicated that civilians were present … the attack would not have been carried out.”
The statement said that the bombing followed guidelines regarding attacking “suspicious structures” in villages where civilians have been warned to evacuate.
As a result of the incident, the statement said, the guidelines would be evaluated and updated.
It added that Hezbollah “use civilian structures inside villages to store weaponry and hide in after launching rocket attacks”.
The statement said that more than 150 rockets have been launched from Qana and the area around it since July 12, when the current conflict started.
Dan Halutz, the chief of staff of the Israeli military, apologised for the loss of civilian life but said that Hezbollah “uses civilians as human shields and intentionally operates from within civilian villages and infrastructure”.