The government should be stripped of its responsibility for training junior doctors in England, a report says.
Professor Sir John Tooke was asked to look at the system after the chaos of last year when 30,000 doctors were competing for 20,000 NHS training jobs.
Thousands of medics protested on the streets, complaining about the system and the application process.
Sir John has called for a new body, NHS Medical Education England to manage postgraduate medical training.
The body should also have responsibility for liaising with the devolved administrations in Scotland, Wales and Northern Ireland to ensure cohesion across the UK.
And it should have its budget ring-fenced - in recent years training funds have been raided to plug deficits.
Sir John's report also warned measures need to be taken to ensure that junior doctor training did not suffer when the European Working Time Directive - limiting doctors to 48 hours a week - fully comes into force next year.
The inquiry into Modernising Medical Careers (MMC) was set up by then health secretary Patricia Hewitt last May as she faced calls to quit over the new system.
MMC was designed to cut the number of years it takes for junior doctors to reach consultant level from about 14 years to 11.
But medics complained that application forms under the online Medical Training Application Service were badly worded and resulted in many of the best candidates not being granted interviews.
The disparity between the number of training posts and applicants was caused by the streamlining of the system, an increase in graduates from the investment in medical schools since Labour came to power and a large pool of foreign doctors.
Only about 14,000 of the doctors looking for specialist posts were UK trained and the overwhelming majority of these got jobs.
On top of the training posts, there were also thousands of service posts, but these do not count towards a doctor becoming a consultant.
The situation has prompted calls for UK medical graduates to be given a priority.
However, junior doctors have been warned that competition for posts in the coming year could be even more intense.
Sir John said the issue needed to be looked at as it costs the taxpayer £250,000 to put graduates through medical school, but he did not make any direct recommendations.
The final report comes after an interim version published in October found the government's reform of the system in 2005 was "rushed and poorly communicated".
It also said the present system was unlikely to encourage or reward "striving for excellence" or offer trainees flexibility.
Sir John, who is dean of the Peninsula Medical School in Exeter, said: "Although the original principles of MMC were well conceived, they were lost in translation.
"We have ended up with an inflexible structure that does not encourage excellence."
This year deaneries are being left to organise their own recruitment at a local level after the government suspended the centrally-run arrangements.
The Department of Health will now spend the next few months assessing the report, before setting out how it will proceed for 2009.
Dr Hamish Meldrum, British Medical Association chairman, said: "This report charts a path that can lead us out of the current mess the government has made of doctors' training.
"While there are some areas of detail that need further, careful consideration, action on the key recommendations will deliver better education and training for doctors, for the NHS, and for the public."
Dr Chris McCullough, of the junior doctor pressure group Remedy, said: "We warmly welcome the report. It is a serious blow for the government and essentially a vote of no confidence."
Professor Dame Carol Black, of the Academy of Royal Colleges added: "The recommendations command the support of the profession and the task that now lies ahead is to ensure they are implemented as a matter of urgency."
Professor Morris Brown, chair of the Fidelio group set up to campaign against the new arrangements, described the findings as a "truly damning indictment of the evangelical ramblings and chaotic incompetence which caused last year's disaster."