The head of MI5 said he was "profoundly sorry" the security service did not prevent the Manchester Arena attack.
BBC reports a public inquiry found MI5 missed a significant chance to take action that might have stopped the 2017 bombing.
Chairman Sir John Saunders said the intelligence could have led to suicide bomber Salman Abedi being followed to a car where he stored his explosives.
MI5 director-general Ken McCallum said he regretted that such intelligence was not obtained.
"Gathering covert intelligence is difficult," he said, "but had we managed to seize the slim chance we had, those impacted might not have experienced such appalling loss and trauma."
Twenty-two people died and hundreds were injured when Abedi detonated his homemade device in the foyer of Manchester Arena as crowds left an Ariana Grande concert on 22 May 2017.
The inquiry found two pieces of information about Abedi were assessed at the time by the security service as not being terrorism-related.
An officer admitted they considered a possible pressing national security concern on one of them but did not immediately discuss it with colleagues and did not write up a report that same day.
In his 207-page report, Sir John said: "The delay in providing the report led to the missing of an opportunity to take a potentially important investigative action.
"Based on everything the security service knew or should have known, I am satisfied that such an investigative action would have been a proportionate and justified step to take.
"This should have happened."
But he added that Abedi "demonstrated some security consciousness and that this might have affected the efficacy of the investigative action that I have identified".
Sir John said the intelligence could have led to Abedi being followed to the parked Nissan Micra where he stored his explosives and later moved them to a city-centre rented flat to assemble his bomb.
He said that if MI5 had acted on the intelligence received then Abedi could also have been stopped at Manchester Airport on his return from Libya four days before the attack.
The public inquiry also found Abedi was probably assisted by someone in Libya but it was not possible, on the available evidence, to say who this might have been.
It is the first time an official conclusion has been made about the possible involvement of other people from abroad.
In making this finding, Sir John contradicts an MI5 assessment which said no one other than Salman Abedi and his brother Hashem were knowingly involved in the plot.
The report also found that while Didsbury Mosque in south Manchester, where the Abedi family worshipped, was not an active factor in the brothers' radicalisation, politicisation did happen there.
Sir John said "there was a form of wilful blindness" to some activities, and "weak leadership".
Didsbury Mosque chairman Fawzi Haffar told the BBC he disagreed with Sir John and added: "The chairman can say whatever he wants.
"The chairman has not been to the mosque, none of the lawyers have been to the mosque, they don't know the workings of the mosque.
"I would say to him [the chairman] that they are wrong," Haffar added.
The report concluded that the Abedi family held "significant responsibility" for the radicalisation of Salman and Hashem Abedi.
Those family members responsible include their father Ramadan Abedi, mother Samia Tabbal and elder brother Ismail Abedi, each of whom has held extremist views, the inquiry found.
But Sir John said, other than Hashem Abedi, there was insufficient evidence to attribute specific knowledge of the attack to them.
Sir John's comments were published in the inquiry's third and final report into the atrocity, which dealt with the radicalisation of Abedi and whether the attack could have been prevented.
The first volume has been made publicly available while the second has only been circulated to a limited readership of people with security clearance.
This does not include the families of those who died, their legal teams, or the media as its contents would be damaging to national security if made public, the inquiry was told.
The inquiry process began more than three years ago, and there were 194 days of oral evidence from 267 witnesses.
A minute's silence was held at Manchester Town Hall for the victims before Sir John read out his findings, which included key recommendations.