The Office of Communication, after its inquiry, said Channel 4 "failed to appropriately handle" racist material broadcast during this year's cycle of the reality show during which housemates were accused of bullying Bollywood actress Shilpa Shetty.
The regulator said it found three separate incidents had caused "widespread offense to the public."
An internal inquiry concluded the broadcaster "appeared to condone" racist incidents by not intervening "forcefully.
" Chaired by former BBC director of news Tony Bull, the internal investigation found "great offense" was caused and called for measures to prevent a recurrence.
The two reports were released Thursday, days before the latest cycle of "Big Brother" is scheduled to begin.