The inquiry, co-chaired by former prime minister Geoffrey Palmer, found no misconduct by elite SAS troops during the 2010 raid, which was carried out with US air support.
But it criticised the military for subsequently dismissing claims that civilians were killed during the operation, even though there was evidence suggesting up to five non-combatants died, including a girl aged 8-10.
Attorney-General David Parker said the conduct undermined fundamental tenets of democracy, including the principle that the civilian government controls the military.
“New Zealanders will be shocked at some of the conclusions reached by this report,” Parker said of revelations that senior officers knowingly made false statements to ministers, media and the public.
He said the government had accepted recommendations in the 400-page report, which took two years to compile, calling for the appointment of an independent director-general of defence to ensure the military was held accountable.
“We’ve got to the bottom of a pretty murky situation,” Parker said.
“That sort of transparency can give the New Zealand public confidence that the armed forces are properly within the control of government and they’re not a law unto themselves.”
Parker said New Zealand Defence Force (NZDF) personnel failed to correct statements that it knew were incorrect and even edited reports coming out of Afghanistan to remove references to the possibility that civilian casualties had occurred.
NZDF chief Air Marshal Kevin Short admitted “inaccurate statements were made” but denied there was an orchestrated cover-up.
“NZDF acknowledges and regrets these mistakes,” he said.
“If we are to maintain the trust and confidence of the people we serve, we must be accountable… I will ensure this happens.”
The inquiry was launched after a book entitled “Hit and Run” was published in 2017 accusing the SAS of staging the raid in the northern province of Baghlan as a “revenge attack” after insurgents killed a New Zealand soldier in the area.
The inquiry rejected the book’s claims, adding: “Regrettably, NZDF’s response appears to have been affected by a degree of personal animosity towards the authors”.
New Zealand sent a reconstruction team and a small special forces contingent to join the NATO-led operation in Afghanistan in 2003.
The deployment lasted a decade and resulted in the deaths of 10 NZDF personnel.