The probe, led by Lord MacLean, looked into care at Dunbartonshire's Vale of Leven Hospital between 2007 and 2008.
Of the 143 patients with C. diff, it was a contributory factor in 34 deaths.
Lord MacLean said NHS Greater Glasgow and Clyde (GGC) had "badly let down" patients. The health board apologised unreservedly for a "terrible failure".
The judge said: "The inquiry has discovered serious personal and systemic failures.
"Patients at the Vale of Leven Hospital were badly let down by people at different levels of NHS Greater Glasgow and Clyde who were supposed to care for them."
He added: "There were failures by individuals but the overall responsibility has to rest with the health board."
Lord MacLean said "systems were simply not adequate to tackle effectively a healthcare associated infection" like C. diff.
He added: "The major lesson to be learned is that what happened at Vale of Leven Hospital to cause such personal suffering should never be allowed to happen again."
Lord MacLean also expressed his view that the figure of 34 deaths was probably an underestimate as medical records were not available for all of the patients during the period in question.
He cited poor facilities, such as a lack of wash hand basins and a lack of commodes, as well as issues with the fabric of the building as evidence of poor management.
The judge said that prolonged uncertainty over the future of the Vale of Leven hospital contributed to poor morale and recruitment.
Poor leadership among NHS GGC managers, the judge said, contributed to substandard nursing care and deficiencies in medical staffing.
He said inexperienced junior doctors had too much responsibility and consultants were stretched.
Lord MacLean also said antibiotics were prescribed in cases where it was inappropriate.
His report identified a number of failings:
There are 75 recommendations in his report, including recommendations on infection prevention and control, nursing and medical care, antibiotic prescribing, communication with patients and relatives, and death certification.
Lord MacLean added: "An effective inspection regime, I am convinced, would have been able to identify the dysfunctional nature of infection prevention and control at the hospital.
"There must be an effective line of reporting, accountability and assurance.
"This was lacking for the Vale of Leven Hospital. In addition, repeated warnings over a number of years about the importance of prudent antibiotic prescribing had no impact."
C. diff Inquiry
C. diff is a bacteria which lives harmlessly in the gut of 10% to 15% of adults.
It causes diarrhoea when the delicate balance of gut flora is disturbed, often following a course of antibiotics.
It is easily spread via airborne spores.
The inquiry into the C. diff outbreak at vale of Leven was delayed five times.
The eventual cost of the inquiry is estimated to be just under Â£10m.
Lord MacLean acknowledged that improvements had been made since the C. diff outbreak.
He said: "NHS Greater Glasgow and Clyde did introduce more effective reporting systems for CDI (C. diff) after June 2008 but the message should be reinforced that systems must ensure that important information is relayed from ward to board (NHS GGC).
"I am convinced that the adoption of the recommendations proposed will result in a significantly improved focus on patient care, and in particular, care of patients who contract an infection such as CDI.
"Although it was the failures in how CDI was managed at the hospital that governed the work of the inquiry, the recommendations should, I hope, have a more far-reaching impact."
Andrew Robertson, chairman of NHS GGC, said: "On behalf of the board and our staff, I would like to offer an full and unreserved apology to the patients affected and to the families who lost a relative to C. diff in the months between January 2007 and late 2008.
"This was a terrible failure and we profoundly regret it.
"I can give the firmest of assurances that, as a result of the lessons that have been learned, this could not happen again."
Health board chief executive, Robert Calderwood, added: "Re-iterating my personal apology I hope the relatives can take some comfort that the lessons learned from this outbreak have resulted in significant improvements in clinical practice, for instance, in more prudent prescribing of antibiotics.
"These major improvements introduced since the tragic events of six years ago have made the Vale and all of our hospitals in Greater Glasgow and Clyde safer for patients than they have ever been."
In a statement issued by Thompsons Solicitors, families affected by C. diff at the Vale of Leven said: "There are no words we can say to you today that will accurately convey the anger, hurt and grief we have felt for the past seven years over the suffering that our loved ones endured as they succumbed to this terrible outbreak.
"Many of us watched completely powerless as our dearly loved family members died in distressing and degrading circumstances as hospital staff struggled to cope.
"We have reached the stage today after seven long years where Lord Maclean has identified many of the causes for the outbreak and has made recommendations which we sincerely hope will mean no other families will ever have to suffer the hell we have been through."
The families said the 75 recommendations were "detailed and far reaching" and they expected the health authorities to "fully implement" them.
They added added: "The events at Vale of Leven that began in the late months of 2007 are a shame on the conscious of the Scottish NHS.
"We all believe in the NHS but our faith has been shaken to its very core. As a group will continue to fight until our campaign for justice for loved ones is satisfied.
"We are sincere in our belief that if we can prevent something like this from ever happening again then at least it will be a fitting tribute to their memories."
Newly-appointed Scottish Health Secretary Shona Robison also apologised to the patients and families affected, saying she was "truly sorry".
She said: "Our NHS failed in its duty of care for all of these patients and their families. As the cabinet secretary for health, that is a matter of deep regret for me, this government and indeed the whole of the health service.
"That is why we will accept all 75 recommendations and go further where we can. As well as creating our implementation group, I am today writing to all health boards to ensure they review their services against the report and respond to the government within eight weeks."
Ms Robison acknowledged that Lord MacLean's report had shown "a clear picture of the failings in the system that led to the C. diff outbreak".
These included a "lack of investment in the hospital, which was simply no longer fit for its purpose...a lack of managerial oversight and a fundamental breakdown in the links between what was happening at ward level and those in positions of authority at the board".
"The report highlights those who either abdicated their responsibilities or failed to carry them out effectively," Ms Robison said.
"There is no place for this conduct in our NHS, which fell below even the minimum standards we expect. It is for the health board as the employer to consider the implications and we would expect them to consider the report's findings on this aspect urgently."
The outbreak of clostridium difficile at the Vale of Leven hospital was one of several across the UK at the time.
Authorities often say that much has changed, but this time it really has.  Levels of C. difficile are 75% lower than they previously were.
This has been achieved through better hygiene and infection control, but by far the biggest impact in Greater Glasgow was made through a change in the kind of antibiotics prescribed.
The relatives of those who became ill, or died, rightly want to know why these changes weren't in place earlier.
However, the public may end up asking a bigger question - whether it was worth Â£10m for an inquiry which took so long that by the time it reached its conclusions, the problem had already largely been fixed.
The health secretary noted that at the time of the outbreak, "there was no effective inspection regime at the time to pick up these failings".
"We now have an effective inspection routine through the Healthcare Environment Inspectorate that completes unannounced, comprehensive inspections and demands urgent actions," she said.
Ms Robison added: "Our top priority is that lessons are learned so that what happened at the Vale of Leven can never be allowed to happen again."
The health secretary will give a ministerial statement on the inquiry on Tuesday afternoon, which can be watched live or on demand on BBC Scotland's Democracy Live website.
A full Scottish government response to the report will be published in spring 2015.
Jackie Baillie, the Labour MSP for Dumbarton, said the findings had "vindicated" the families who had called for a public inquiry.
"The C. diff outbreak at the Vale of Leven Hospital was the worst in the UK due to the high mortality rate," she said.
"The families deserve nothing less than a full apology from the hospital management, NHS Greater Glasgow and Clyde and the Scottish government for the mistakes which compromised patient care."
She added: "What happened at the Vale of Leven should never be repeated anywhere in Scotland so it is vital we learn lessons and implement MacLean's recommendations in full."
Scottish Conservative health spokesman Jackson Carlaw, said the report would be "extremely difficult reading" for those who lost loved ones.
He said: "Failing after failing is set out here, and there are very tricky questions for both the health board and the Scottish government."
Mr Carlaw said that as Scotland's new First Minister Nicola Sturgeon was health secretary from May 2007 she would "have to explain why the infection control and inspection regimes were so inadequate, and why the Scottish government wasn't paying attention to lessons being learned south of the border".
He added: "Many of the recommendations set out will already have been acted upon, and I'm sure NHS staff across Scotland are absolutely committed to an outbreak like this never being repeated."
Dr Charles Saunders, chairman of the BMA's Scottish public health committee, said the report was "uncomfortable reading for all of us involved in the provision of healthcare".
"Whilst we recognise, since the beginning of this inquiry, a number of steps have been taken to improve patient safety and the standards of care, it is important that the NHS and the Scottish government are not complacent.
"Some of the circumstances that led to the challenges which were experienced at the Vale of Leven Hospital still exist, and not just in small district general hospitals."
Unison regional organiser, Matt McLaughlin, said: "It is fair to say that NHS Glasgow and Clyde has now put in place systems that would recognise a similar trend were it to occur today and this is to be welcomed.
"However, the report also identifies many issues that are sadly not uncommon across Scotland and that our nursing members have been raising for a long time: short staffing, lack of equipment, wrong skill mix and little or no extra staffing when clinical needs on the ward change."
Campaigners frequently call for a public inquiry to be held following a scandal or tragedy.
But only four have been held since the current law governing them was passed in 2005.
The problem for the government is that inquiries are costly and lengthy.
Lord Penrose's inquiry into the infection of blood for transfusions with the hepatitis C virus has yet to report, although it has reportedly cost Â£12m and has taken five years so far.
But public inquiries, which are chaired by a judge, are able to make recommendations which become legally binding.
During the ICL inquiry into the Stockline explosion, evidence about badly-maintained underground gas pipes prompted the Health and Safety Executive (HSE) to inspect other premises and issue enforcement notices.
In 2012 the Scottish government announced it would consult on improvements to the public inquiry system to make them more responsive, quicker and cheaper.
But nothing has so far been done.
Scotland's largest health board has been heavily criticised by an inquiry into the country's worst Clostridium difficile (C. diff) outbreak.