In the report, scientists at the Defence Intelligence Staff described how glowing "plasmas" of gas were created by charges of electricity. Air flows then sculpted the plasmas into aerodynamic shapes which appeared to fly at extraordinary speeds through the sky.
The study looking at evidence collected over the past 40 years, was completed in 2000, but has only been made public now under the Freedom of Information Act.
The researchers were emphatic that UFOs did not come from alien civilisations, but equally did not dismiss people who claimed to have seen them as fantasists or hoaxers, the newspaper said.
Instead, they said such plasmas could play tricks on the mind, creating vivid impressions. They noted that "local (electromagnetic) fields ... have been medically proven to cause responses in the temporal lobes of the brain."
As a result, people who thought they'd seen a UFO were instead suffering from "extended memory retention and repeat experiences" induced by the plasmas.
The scientists reportedly concluded that although UFOs had "defied credible description" as to their cause, they were confident that they now had "a reasonably justified explanation".
The report was released under the Freedom of Information Act following an application by Dr David Clarke, a lecturer at Sheffield Hallam University, and his fellow researcher Gary Anthony.
The Sunday Times and the BBC said the research began in 1996 and analysed 40 years of evidence on UFOs.