The independent study was carried out by Lord Ouseley, former chairman of the Commission for Racial Equality, months before the latest race riots hit the city.
It says police and the city's leaders failed to tackle segregation, racial intolerance and wrongdoing because they were frightened of being called racist.
The report was commissioned by Bradford Vision - formerly Bradford Congress, a partnership between the council and other public and private organisations - to help improve relations between black, white and Asian communities.
It discovered that schools are effectively segregated, with different ethnic groups not mixing and open racial conflict and harassment.
The study recommended the setting up of a multi-cultural centre of learning to promote understanding about different cultures.
Lord Ouseley said he wanted to see young people from all backgrounds involved in politics and positions of leadership: "Young people are the future of the district and it is vital that they are empowered."
The study, due to be published as The TES went to press, comes just days after hundreds of disaffected youths rioted in the city, injuring more than 100 police officers and causing thousands of pounds worth of damage to businesses and property.