The report blamed racial stereotyping and discrimination
Most police forces in England and Wales still unfairly target black and Asian people in their use of stop and search powers, the equality watchdog has said.
The Equality and Human Rights Commission said it could not rule out legal action against some forces.
Its research found black people were at least six times more likely and Asian people around twice as likely to be stopped and searched as white people.
The Home Office acknowledged that there were "improvements still needed".
Nonetheless, the commission has written to forces warning that they could potentially be sued for breaching the Race Relations Act.
The report came as EHRC chairman Trevor Phillips was criticised by a parliamentary committee over his leadership.
According to the EHRC's review, the evidence suggested that racial stereotyping and discrimination were significant factors behind the higher rates of stops and searches.
The areas with the most disproportionate use of the powers against black people included Dorset, Hampshire and Leicestershire, said the EHRC.
More than 11% of black people across England were stopped and searched in 2007-8, with the figure almost 20% in London, the report suggested.
That compares with 2.2% of people stopped and searched in the population as a whole.
It estimated that black people in London borough of Wandsworth were more than nine times more likely than white people to be stopped and searched. The likelihood was more than six times higher in four other boroughs: Lambeth (7.3); Tower Hamlets (7.2); Hammersmith and Fulham (6.9) and Kensington and Chelsea (6.9).
Researchers also found that black and ethnic minority youths were over-represented in the criminal justice system.
According to the EHRC report, research found police were more likely to give white youths more lenient reprimands or fines, while black youths were more likely to be charged.
The Stop and Think report drew on data from the Ministry of Justice, the Home Office, the Metropolitan Police and the Office for National Statistics.
It found that across England and Wales there were 22 stops and searches per 1,000 people in 2007-08 - totalling more than 170,000 in all.
But it calculated that there would have been only about 25,000 searches if black people were stopped and searched at the same rate as white people.
EHRC commissioner Simon Woolley said stop and search was not even an effective way of tackling crime.
He added: "We do know that it is a sledgehammer-to-crack-a-nut approach.
HAVE YOUR SAY
The only time a specific ethnicity should be targeted in stop and search is where the police have specific information on the race of a suspect
"Literally hundreds of thousands of black people are subject to this humiliating experience. Actually, what the evidence does tell us is that when police forces use different tactics, they cut stop and search, crime goes down."
A Home Office spokeswoman said: "The government is committed to delivering a policing service, and a wider criminal justice system, which promotes equality and does not discriminate against anyone because of their race. There will be no let-up in driving forward the improvements still needed.
"The National Policing Improvement Agency's 'Next Steps' programme will enable individual police forces to address these issues in stop and search more effectively."