The document could be a fatal blow to the Republican Party's campaign ahead of national elections in November, as it claims the 2003 invasion of Iraq made America safer, not weaker.
Opinion polls show President George W Bush's party may lose control of both houses of Congress in the mid-term polls — in large part due to unhappiness over the war in Iraq.
Mr Bush has argued repeatedly in pre-election speeches that Iraq is the central front in the war on terrorism and that demands for a US troop withdrawal from the country by the opposition Democrats underscores why the centre-left party should not be trusted with the nation's security.
Damning report
However assertions were looking decidedly shaky today after The New York Times and The Washington Post released details of the classified National Intelligence Estimate, the most comprehensive assessment yet of the war, based on analyses of all 16 of America's intelligence agencies.
The report, Trends in Global Terrorism: Implications for the
United States, says "the Iraq war has made the overall terrorism problem worse," an official familiar with the document told The Times.
The Washington Post said the report described the Iraq conflict as the primary recruiting vehicle for violent Islamic extremists.
"While the US has seriously damaged al-Qaeda and disrupted its ability to carry out major operations since the September 11, 2001, attacks on New York and Washington, it noted, radical Islamic networks have spread and decentralised.
Bush opponents pounce
Democratic leaders were quick to jump on the report's conclusions as clear evidence of the failure of Mr Bush's policies.
"This intelligence document should put the final nail in the coffin for President Bush's phony argument about the Iraq war," Senator Edward Kennedy said.
"The fact that we need a new direction in Iraq to really win the war on terror and make Americans safer could not be clearer or more urgent — yet this administration stubbornly clings to a failed 'stay-the-course' strategy," he said.
The White House, while reiterating its traditional stance of not commenting on classified reports, said The New York Times story "isn't representative of the complete document".
"We've always said that the terrorists are determined. Keeping the pressure on and staying on the offence is the best way to win the war on terror," a White House spokesman added.
But the leaked intelligence report is hardly good news for Mr Bush and the Republicans, coming on top of a messy revolt by top Republican senators against a Bush plan for legitimising how the US interrogates and prosecutes terrorist suspects.
The Senate rebels, who included possible candidates to succeed Bush in 2008, reached a compromise agreement with the White House late this week.
But the unseemly row already diverted attention away from Republican efforts to present a unified front on the issue of national security during the final stretch of the election campaign.