The US Department of Justice inspector general's internal report found that the law enforcement bureau had "authorised purpose" to initiate the investigation.
The watchdog said it found numerous errors but no evidence of political bias against US leader Mr Trump by the FBI when it opened an investigation into his presidential campaign and Russia in 2016.
Inspector General Michael Horowitz's report gave ammunition to both Mr Trump's supporters and his Democratic critics in the debate about the legitimacy of the probe, which clouded the first two years of his presidency.
But it will not be the last word on the subject.
Federal prosecutor John Durham, who is running a separate criminal investigation on the origins of the Russia probe, said he did not agree with some of the report's conclusions.
Horowitz found that the FBI had a legal "authorised purpose" to ask for court approval to begin surveillance of Carter Page, a former Mr Trump campaign adviser.
But he also found a total of 17 "basic and fundamental" errors and omissions in its applications to the Foreign Intelligence Surveillance Court (FISA) that made the case appear stronger than it was.
For example, the FBI continued to rely on information assembled by a former British intelligence officer named Christopher Steele in its warrant applications even after one of Mr Steele's sources told the agency that his statements had been mischaracterized or exaggerated.
Senate Judiciary Committee Chairman Lindsey Graham, a Republican, said that effectively turned the investigation into a "criminal enterprise" to defraud the court and violate Page's rights.
"I don't fault anybody for looking into allegations like this. I do fault them for lying and misrepresenting to the court," said Mr Graham, who will hold a hearing on Wednesday examining the report's findings.
Democrats said the report showed that there was no basis for Mr Trump's repeated charges that the FBI was trying to undermine his chances of winning the White House.
"This report conclusively debunks the baseless conspiracy that the investigations into Mr. Trump's campaign and its ties to Russia originated with political bias," Senate Democratic Leader Chuck Schumer said at a news conference.
Trump called the investigation a witch hunt and assailed FBI leaders and career staffers who worked on it. "This was an attempted overthrow and a lot of people were in on it, and they got caught," the president told reporters at the White House.
The FBI investigation was taken over in May 2017 by former FBI chief Robert Mueller after Trump fired James Comey as the agency's director.
"Those who attacked the FBI for two years should admit they were wrong," Mr Comey said in a Washington Post op-ed.
Mr Mueller's 22-month special counsel investigation detailed a Russian campaign of hacking and propaganda to sow discord in the US and help Mr Trump defeat Democratic presidential candidate Hillary Clinton. Mr Mueller documented numerous contacts between Trump campaign figures and Moscow but found insufficient evidence of a criminal conspiracy.
Attorney General William Barr, who ordered the Durham investigation, said the report showed that the FBI launched its investigation "on the thinnest of suspicions."
Agencies contributed to this report