A town hall employee who plugged an infected memory stick into a work computer crippled the IT system and left the council with a £501,000 bill.
A virus infected Ealing Council's system for several days after the memory stick was used at the housing department in west London in May.
The local authority had to a pay for emergency IT work and lost £90,000 as it wrote off 1,838 parking tickets.
Its library service lost £25,000 as it could not issue fines.
A council report said: "At the point the memory stick was plugged in the virus attacked the host PC.
"It blocked connections to anti-virus and Microsoft Support websites and attempted to establish connections with 500 internet sites chosen at random from a selection of 25,000 seeking instructions from its author, and sought to also contact other similarly infected PCs that it could find.
"It then started propagating itself across the Ealing network."
A council spokesman said: "Like many other organisations, Ealing Council's computer and telephone network was attacked by a sophisticated virus.
"The council acted immediately to protect all data and ensure that essential frontline services could continue to operate.
"Costs to the council included urgent work to recover computer systems and prevent the virus from spreading."
Councillor Julian Bell, leader of Ealing's opposition Labour group, said: "This report confirms my concerns, despite repeated assurances to the contrary, that the council was not properly prepared, and in the current climate we cannot afford to lose this sort of money."