Up to £75m of public money should be spent on a new, high-quality Scottish TV channel, it has been recommended.
The Scottish Broadcasting Commission said the not-for-profit digital operation would fill a "missing piece of the public service jigsaw".
The commission, set up by the Scottish Government, also called on the BBC to review its commissioning policy for Scottish programmes.
And it said some broadcasting powers should also be devolved to Scotland.
These would include requiring broadcasters to report to the Scottish Parliament.
However, the commission's final report stated that legislative powers for broadcasting should remain with the UK Government.
The commission, chaired by former BBC news boss Blair Jenkins, made a total of 22 recommendations.
Welcoming the findings, Scottish First Minister Alex Salmond said: "The report is a major challenge to the Westminster Government and the broadcasters themselves to step up to the plate - there can no longer be no possible excuse for inaction."
The report said the digital switchover, due for completion in Scotland by 2011, should provide the vehicle for a Scottish channel featuring "high-quality information and entertainment, including news and current affairs covering Scottish and international issues, and innovative and ambitious content".
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The annual budget could be between £50m and £75m, although the commission did not say where the cash should come from.
The case for such a channel and a related online presence had "strengthened considerably", said the commission in its findings.
It added: "After more than 50 years of opt-out television services, with schedulers struggling on both BBC and ITV to find decent peak-time slots for Scottish programmes, it is right to have a network based in Scotland serving audiences in Scotland."
The channel, the commission said, would also provide a crucial competitor for the BBC, which suffered from a "perceived lack of ambition" in Scottish productions, according to evidence collected by the body.
The BBC Trust should also ensure better news coverage of the devolved nations, and the commission also called for a review of BBC Radio Scotland - currently the only Scotland-wide broadcasting service - amid criticism that it lacked ambition and space for new ideas.
The commission said the BBC should maintain a steady 8.6% of network commissions from Scotland, with the same target for Channel 4, and consider moving BBC One, Two, Three or Four to Scotland.
BBC Scotland controller Ken McQuarrie welcomed the digital channel proposal, adding: "I would welcome an investment for audiences in Scotland.
"We want to hear more about exactly is intended and, also, how it will be funded."
The commission also expressed concern over whether ITV, which has been pursuing a more commercial agenda, would remain within the public service broadcasting framework, but recommended that STV be required to continue to produce news and current affairs for Scottish viewers.
Scotland Office Minister David Cairns backed the report's "underlying principle" that Scottish broadcasting should remain an integral part of UK broadcasting.
Scottish political parties broadly welcomed the report, although the Liberal Democrats warned that any new channel would have to be properly resourced, while the Tories said it should be paid for party out of private funding.
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