A top Scotland Yard officer and the head of the Crown Prosecution Service both "bear culpability" for failing to review evidence of phone hacking, the MPs found.
The select committee said ex-Metropolitan Police counter-terrorism chief John Yates and Director of Public Prosecutions Keir Starmer should have ensured that the material held by police was properly investigated in the years after the original prosecutions.
The MPs also criticised the Met for "retreating" from its promise to inform potential hacking victims and suggested that the force had "no interest or willingness" to uncover the full extent of illegal voicemail interception.
Scotland Yard's original phone-hacking inquiry resulted in the jailing of News of the World royal editor Clive Goodman and private investigator Glenn Mulcaire in January 2007 after they admitted intercepting voicemail messages left on royal aides' phones.
But the Met was widely criticised for limiting the scope of the investigation, despite evidence from Mulcaire's notebooks that there could be many more hacking victims.
The committee's report concluded: "Neither former acting deputy commissioner Yates nor the Director of Public Prosecutions Keir Starmer were personally involved in the key events that occurred in 2006-07.
"Given the extraordinary revelations in the media and in civil court cases in the years that followed, however, they both bear culpability for failing to ensure that the evidence held by the Metropolitan Police was properly investigated in the years afterwards, given all the opportunities to do so, and that the sufficiency of the evidence was not reviewed by the CPS."
It went on: "Each subsequent revelation of additional victims or evidence which may implicate other journalists beyond the original one 'rogue reporter' strengthens the impression that the police at that time had no interest or willingness to uncover the full extent of the phone-hacking which had taken place."
The MPs said Scotland Yard's approach towards disclosing the evidence they held about hacking victims become "less, rather than more, co-operative" as more people launched civil claims against the News of the World.
The report noted: "Time and again during the civil litigation, claimants were told - falsely - by the Metropolitan Police that it held no evidence that they had either been targeted or their phones hacked."
The MPs said they hoped Lord Justice Leveson's report will be "robust" about the lessons to be learned from the Met's failures and the effect the scandal has had on the force's reputation.
Scotland Yard reopened its phone-hacking investigation in January last year after receiving new information from the New of the World's publishers, News International.