MPs have criticised the failure to discipline anyone involved in the decision to allow members of a captured Royal Navy crew to sell their stories.
The crew was held captive by Iran for 13 days
The Commons defence committee said a catalogue of serious errors resulted in some of the 15 seized by Iran in March speaking to the press after release.
The publicity was "deeply damaging" and the whole affair had been a "national embarrassment", it added.
The MoD said action had been taken over the operational aspects of the case.
The Royal Navy crew, comprising sailors and marines, was seized in the Gulf in March and held for 13 days.
Defence Secretary Des Browne later apologised to the House of Commons about the subsequent sale of stories, but the committee said this was not enough.
In a report, it said: "It is clear that the decision to allow the service personnel to sell their stories was a serious mistake and deeply damaging to the reputation of the Royal Navy.
"The secretary of state for defence has accepted responsibility and apologised. This should not absolve others from blame.
"We were told that no action had been taken against individuals, military or civilian, for failings relating to media handling. Given the catalogue of serious mistakes made, we think this is unacceptable."
In contrast, the committee said that formal disciplinary action had been taken against a number of individuals who had been held to be at fault in relation to the actual incident itself.
The committee said that a report by retired Royal Marines Lieutenant General Sir Rob Fulton into the operational aspects of what went wrong had been "robust in identifying serious weaknesses".
But it was not made public because of the sensitive operational information contained in it.
The committee's chairman, Conservative MP James Arbuthnot, said: "The capture of Royal Navy personnel last March was an embarrassment to the whole country and the way it was handled afterwards compounded the embarrassment.
"People around the country, including many retired service people, have been asking how it could have come about."
Shadow defence secretary Liam Fox said "Labour's part-time defence secretary" had made "monumental mistakes" in allowing the selling of stories.
"This fiasco seriously damaged the reputation of the Royal Navy and the standing of this country abroad," he said.
A Ministry of Defence spokesman said: "We have made good progress in putting right the shortcomings identified by General Fulton.
""No courts martial were justified but administrative action has been taken against a number of service personnel across a wide spectrum of ranks. We are not prepared to discuss individual detail."
Iranian Revolutionary Guards captured the 14 men and one woman on 23 March following a routine boarding operation in the Gulf off Iraq.
The crew was later released by Iranian President Mahmoud Ahmadinejad.
Iran said the Navy vessel had strayed into its territorial waters, but Britain maintains that it was in Iraqi waters under a UN mandate at the time.