The Ethiopian army has been killing, raping and torturing people in the western Gambella region since the end of 2003, Human Rights Watch says.
Thousands of people have fled Gambella since the December 2003 massacre
It says some 425 Anuak people were killed after an alleged ambush by Anuak gunmen on a government vehicle.
The army carried out the human rights violations under the guise of combating Anuak bandits, the organisation says.
Ethiopia's Information Minister Bereket Simon has rejected the claims, calling them a "blatant lie".
"We don't accept such recriminations. We don't believe this is a crime against humanity," Mr Simon told the BBC's Focus on Africa programme.
Government investigations had revealed that 65 people were killed in December 2003 in violence between local ethnic Anuaks and highlanders, in which the army had remained neutral, he said.
The HRW report says: "The prevailing climate of impunity that now exists in Gambella has allowed ENDF (Ethiopia National Defence Forces) soldiers to prey upon and terrorise the Anuak communities they patrol."
A three-day rampage followed the ambush in December 2003 in which local Anuak people were killed, raped and mobs burned down more than 400 houses.
Out of the 19 communities surveyed by HRW, entire villages were burned to the ground and thousands of Anuak fled their homes after the reprisal attacks.
"I saw people running. All of a sudden I saw and heard the government soldiers shooting," a young Anuak man told HRW about the first moments of the massacre.
"Because there were so many people running here and there we collided and I fell down. I started to see people who were fallen down dead and so I got up and started running again."
The 64-page report also quoted a person who saw soldiers tie an Anuak man's hands to his legs before running him over with a military truck.
HRW says the vast majority of the army are drawn from the same ethnic group as Gambella's highlander community.
Four hundred homes were destroyed in the violence
Gambella's former governor Okello Akuaye, who accused the soldiers of taking the highlanders' side during three days of ethnic fighting, has sought political asylum in Norway.
But Mr Simon said the army during this period had been "on a mission to stabilise the situation".
Government investigations had found six military officers were involved in the killings and they would be prosecuted, he said.
"Now they are in custody and are going to be charged for the killing and will face the court."
HRW has called for an independent investigation into the human rights violations in Gambella from December 2003 to the present.
The BBC's Mohammed Adow in Addis Ababa says insecurity in Gambella - one of Ethiopia's least developed regions - is often aggravated by competition for land.