David Anderson QC said there was no viable alternative to the use of so-called bulk interception powers by MI5, MI6 and GCHQ.
The report concluded there was a “proven operational case” for three out of the four powers examined, and a distinct case, even if not yet proven, for the fourth - hacking into smart phones and computers "over a large geographical area".
The review said bulk acquisition of communications data - the gathering of data about communications, but not content - is “crucial in a variety of fields, including counter-terrorism, counter-espionage and counter-proliferation” and its use cannot be matched by data acquired through targeted means.
Read more: Iron-strong resolve in the face of terrorism
The report also said bulk interception - the tapping of undersea internet cables to target non-UK suspects - is of "vital utility" to security services, citing one case where a kidnap had taken place in Afghanistan. The report sad that "without the use of bulk interception, it was highly likely that one or more of the hostages would have been killed before a rescue could be attempted".
Meanwhile, bulk personal datasets are of great utility to the security and intelligence agencies and in vital areas of work, it added. There is “no practicable alternative”.
However, Anderson also said that the case for as yet unused powers to hack into large numbers of smart phones and computers remains untested, but has been made in principle.
He added there are likely to be cases where “no effective alternative is available”, but also recommended a new independent panel of experts be created to advise on how the impact of privacy can be minimised.
Anderson did not look at some elements of the Investigatory Powers Bill, which returns to Parliament later this year, including the planned storage of internet connection records.
Prime Minister Theresa May said:
Mr Anderson’s report demonstrates how the bulk powers contained in the Investigatory Powers Bill are of crucial importance to our security and intelligence agencies.
These powers often provide the only means by which our agencies are able to protect the British public from the most serious threats that we face. It is vital that we retain them, while ensuring their use is subject to robust safeguards and world-leading oversight which are enshrined in the IP Bill.
May had promised to establish an independent review to examine the operational case for powers allowing such collection of data.
It was initially a concession by the then-home secretary May to her counterpart, shadow home secretary Andy Burnham, who had qualms about the legislation, referred to by critics as the snoopers' charter.
Burnham said: "We welcome this report that the government commissioned following pressure from Labour earlier this year and thank David Anderson and his group for their important work. When the House of Lords debates the Investigatory Powers Bill, they will now be able to consider real evidence for the use of bulk powers.
"It is concerning, however, that the Prime Minister, who knows this legislation well, has not accepted the report in full and in particular David Anderson’s call for a Technological Advisory Panel to ensure legislation keeps pace with changing technology.
"She and the Home Secretary must accept the report in its entirety and deliver on the separate concessions extracted by Labour in the Commons - tougher restrictions on the use of Internet Connection Records and stronger protections for journalists and lawyers."