The report from a UN special investigation found that a lack of leadership in the UN mission culminated in a "chaotic and ineffective response" during heavy fighting in the capital from July 8 to 11.
Peacekeepers abandoned their posts and failed to respond to pleas for help from aid workers under attack in a nearby hotel compound, according to a summary of the report.
The UN mission known as UNMISS has 16,000 troops deployed in South Sudan, which has been at war since December 2013.
"The special investigation found that UNMISS did not respond effectively to the violence due to an overall lack of leadership, preparedness and integration among the various components of the mission," said UN spokesman Stephane Dujarric.
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Chinese peacekeepers abandoned their positions at least twice and Nepalese peacekeepers failed to stop looting inside the UN compound, the inquiry found.
Ban said he was "deeply distressed by these findings" and "alarmed by the serious shortcomings" of the UN mission.
The UN chief "has asked for the immediate replacement of the force commander," said Dujarric, adding that other measures would follow.
Lieutenant General Johnson Mogoa Kimani Ondieki of Kenya had been the force commander since May. UN mission chief Ellen Margrethe Loj of Denmark steps down at the end of November after more than two years in the job.
The fierce fighting in Juba involved helicopter gunships and tanks pitting President Salva Kiir's government forces against those loyal to ex-rebel chief Riek Machar.
Machar fled the capital during the violence, which derailed international efforts to form a unity government and restore peace to South Sudan.
No response to screams
About a dozen aid workers and UN staff housed at the Terrain hotel compound were attacked by South Sudanese soldiers on July 11, but the peacekeepers, just 1.2 kilometers (0.7 miles) away, failed to come to their aid.
There were multiple requests to the peacekeepers from China, Ethiopia, India and Nepal for forces to be dispatched, "but each UNMISS contingent turned down the request, indicating their troops were fully committed."
During the attack, "civilians were subjected to and witnessed gross human rights violations, including murder, intimidation, sexual violence and acts amounting to torture perpetrated by armed government soldiers," said the report.
The investigation led by retired Dutch general Patrick Cammaert was unable to verify allegations that peacekeepers did nothing to help women who were raped during the heavy fighting.
But in a later incident on September 2, a woman was assaulted near the entrance to a UN compound "in plain sight" of the peacekeepers, the report said.
"Despite the woman's screams, they did not react" and other UN staff intervened, it added.
After the crisis, peacekeepers "continued to display a risk-averse posture unsuited to protecting civilians from sexual violence" and other attacks.
UNMISS soldiers refused to conduct foot patrols near UN bases and instead would "peer out from the tiny windows of armored personnel carriers, an approach ill-suited to detecting perpetrators of sexual violence and engaging with communities to provide a sense of security."
British Ambassador Matthew Rycroft described the report as a "damning indictment" and said the Security Council as well as the UN system must draw lessons from the failures.
The council is set to discuss the crisis in South Sudan on November 17.
