Litvinenko, a prominent Kremlin critic, died in 2006 aged 43, three weeks after drinking tea laced with radioactive polonium at an upmarket London hotel.
Andrei Lugovoi and Dmitri Kovtun, two Russians identified as prime suspects by British police, probably carried out the poisoning under the instruction of Russian security services, the inquiry said.
Prime Minister David Cameron's office called the findings "extremely disturbing" but the government did not announce sanctions in response, instead summoning Moscow's ambassador to London for talks.
It did, however, impose asset freezes on the two alleged perpetrators named by the inquiry.
There were cries of "Yes!" at the High Court in London as the main findings were read out.
Litvinenko's wife Marina, dressed in black and accompanied by her 21-year-old son Anatoly, embraced supporters afterwards.
She has spent years pushing for a public inquiry to be held and had called for sanctions against Russia and a travel ban on Putin.
"I'm very pleased that the words my husband spoke on his deathbed when he accused Mr Putin of his murder have been proved true in an English court," she told reporters outside the court.
She told AFP after the hearing: "I can't say it is what I hoped for but I really appreciate it."
Russia dismissed the findings, calling the inquiry "politically motivated".
"We had no reason to expect that the final findings of the politically motivated and extremely non-transparent process... would suddenly become objective and unbiased," foreign ministry spokeswoman Maria Zakharova said in a statement.Lugovoi, now a far-right, pro-Putin lawmaker in Russia, described it as "absurd".
- 'Acting for a state body' -
Judge Robert Owen, the inquiry's chairman, said he was "sure" that Lugovoi and Kovtun placed polonium-210 in the teapot at the Millennium Hotel's Pine Bar, where they met Litvinenko on November 1, 2006.
"The FSB operation to kill Litvinenko was probably approved by Mr (Nikolai) Patrushev and also by President Putin," the report said.
Patrushev is a former director of the FSB, the successor organisation to the Soviet-era KGB spy agency, and has been a key security official since 2008.
Polonium-210 is a rare radioactive isotope only available in closed nuclear facilities.
The report, which contained classified evidence redacted from the version made public, said this suggested that Lugovoi and Kovtun "were acting for a state body rather than, say, a criminal organisation".
There was "no evidence" to suggest that either Lugovoi or Kovtun had any personal reason to kill Litvinenko and they were likely to be acting under FSB direction, Owen added.
Shortly after the report was published, London's Metropolitan Police issued a statement stressing they still wanted the pair to be extradited. "Our objective will always be to put them before a criminal court," it added.
Litvinenko, an ex-KGB agent turned freelance investigator who also worked for British intelligence, accused Putin of ordering his killing in a statement before he died on November 23, 2006.
Owen said there were "powerful motives" for the killing. Litvinenko was seen as "having betrayed the FSB" and had regularly targeted Putin with "highly personal public criticism", including an accusation of paedophilia.
- Russia's role in Syria -
Britain's government announced the inquiry in July 2014, just days after the downing of a Malaysian passenger jet over eastern Ukraine -- a tragedy blamed on Russia's involvement in the conflict in the region -- in what was seen as a way of punishing Russia. It started work in January last year.
Britain's response to the inquiry's findings fell short of the sanctions which some had called for.
Home Secretary Theresa May stressed the importance of Russia's role in talks attempting to resolve the conflict in Syria in a statement on the inquiry to the House of Commons.
She said Britain would make "senior representations" over Moscow's "failure to cooperate and provide satisfactory answers".
Urging Putin and Russia to "make a positive contribution to global security and stability," May added: "They can, for example, play an important role in defeating Daesh," she said, using another term for the Islamic State group.
- AFP
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