The Care Quality Commission (CQC) published its findings after an inspection of Winterbourne View near Bristol.
The review was ordered after BBC Panorama filmed patients being pinned down, slapped and taunted.
Police said they had arrested a 12th person in connection with the inquiry.
The Panorama programme was contacted by whistleblower Terry Bryan who alerted the BBC with his concerns about some staff.
Mr Bryan, a senior nurse, acted after his concerns were not followed up by the home's management or the CQC.
'Appalling misconduct'The CQC report on Winterbourne View found owners Castlebeck Care had failed to ensure residents living at the unit were adequately protected from risk, including the risks of unsafe practices by its own staff.
It said: "There was a systemic failure to protect people or to investigate allegations of abuse.
"The provider had failed in its legal duty to notify the Care Quality Commission of serious incidents including injuries to patients or occasions when they had gone missing."
Inspectors also noted staff did not appear to understand the needs of the people in their care and said "some staff were too ready to use methods of restraint without considering alternatives".
Winterbourne View was closed down in June.
The CQC's director of operations Amanda Sherlock said that, following the investigation, it was clear the abuse was far worse than they were warned of by Mr Bryan.
Winterbourne View, which had 24 patients, was closed down last month She claimed that Castlebeck had "misled" the CQC, and if officials had known about what was taking place they "could have taken action earlier".
In response to the CQC report, Castlebeck's Chief Executive, Lee Reed, said: "We are truly sorry for the failures which led to the terrible mistreatment suffered by patients at Winterbourne View.
"As soon as the company was made aware of the appalling misconduct of staff at Winterbourne View, we alerted the police and other relevant authorities.
"We then took immediate remedial steps to safeguard the welfare of all our service users. This work is ongoing, and is our absolute priority."
The latest person to be arrested is a 27-year-old man from the South Gloucestershire area.
Police said he had been arrested under the Mental Capacity Act and had been released on police bail.
Eleven other people, eight men and three women, previously arrested remain on police bail pending further inquiries.
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