Lord Justice Leveson condemned decades of "outrageous" behaviour by newspapers as he called for a new regulatory system backed by law.
In a damning report, the judge said the press had repeatedly acted as if its own code of conduct "simply did not exist", and "wreaked havoc with the lives of innocent people".
He proposed expanding Ofcom's legal remit so it became a "verification" body, able to recognise an independent regulator that had "credible" rules and powers to enforce them - such as huge fines.
Publications would not be obliged to sign up to the new body but would be subject to harsher punishment if the courts found they libelled people or breached civil law. In a stark threat, Lord Justice Leveson also warned that turning Ofcom into a "backstop" regulator was an option if the industry refused to co-operate with his scheme.
The suggestions - in a hugely detailed 2,000-page report that also heavily criticised politicians for becoming too cosy with the media - leave David Cameron with a major headache as he seeks to forge cross-party consensus.
The Prime Minister is due to give his response in a statement to Parliament. But his Liberal Democrat deputy Nick Clegg has already signalled that they do not agree on the issue by announcing he will make a separate statement afterwards. In a message issued on his personal Twitter account, Mr Cameron said he would aim to give "a clear sense of direction" in his statement to the Commons. Mr Cameron's own party is also badly split, with dozens of Tory MPs having warned against any form of statutory underpinning and dozens more expressing support for such a move.
Summing up his 16-month inquiry, Lord Justice Leveson said: "The evidence placed before the inquiry has demonstrated, beyond any doubt, that there have been far too many occasions over the last decade and more (itself said to have been better than previous decades) when these responsibilities, on which the public so heavily rely, have simply been ignored. There have been too many times when, chasing the story, parts of the press have acted as if its own code, which it wrote, simply did not exist.
"This has caused real hardship, and on occasion, wreaked havoc with the lives of innocent people whose rights and liberties have been disdained. This is not just the famous but ordinary members of the public, caught up in events (many of them truly tragic) far larger than they could cope with but made much, much worse by press behaviour that, at times, can only be described as outrageous."
In his statement, Lord Justice Leveson said that "putting a policeman in every news room is no sort of answer", because powers of law enforcement are limited to allow the press to properly act in the public interest. However the press is "still the industry marking its own homework", and needs an independent self-regulatory body to promote high standards, he said.
He told the audience gathered in Westminster that he had seen no evidence that corruption by the press was a widespread problem in relation to the police. But he said that politicians and journalists had become too close at times, with a "particular kind of lobbying out of the public eye".