More than 800,000 - or one in five - of all crimes reported to the police each year are not being recorded by officers, a report suggests.
The problem is greatest for victims of violent crime, with a third going unrecorded. Of sexual offences, 26% are not recorded.
An HM Inspectorate of Constabulary report looked at more than 8,000 reports of crime in England and Wales.
The watchdog said the failure to record crime properly was "indefensible".
Home Secretary Theresa May described the findings as "utterly unacceptable", but police representatives said the situation had improved since the study.
The Association of Chief Police Officers said workload pressures, target culture and inadequate supervision all contributed to under-recording.
An unrecorded crime is classed as one that is reported to the police but not recorded as an offence. It means an investigation into the alleged crime is unlikely to happen.
The inspection reviewed reports of crime between November 2012 and October 2013 across all 43 forces in England and Wales.
It found that:
by Danny Shaw, BBC home affairs correspondent
The under-recording of crime is more than a question of getting the statistics wrong.
If an offence isn't officially logged, it may not be investigated. And without a police inquiry there's no hope of finding the perpetrator and preventing other crimes.
Inspectors say there may well be people on the streets now, able to commit more crimes, who would have been locked up had their original offence been properly dealt with.
There are indications that some forces are improving. But there's also a warning in the report that increasing workload pressures among police - who are having to do more with considerably less - will "sharpen" the incentive not to record crimes.
Chief Inspector of Constabulary Tom Winsor told the BBC that the under-recording of sexual offences was of particular concern and more sex crimes would be reported if victims felt the could trust the police.
"The police need to institutionalise a culture of believing the victim. Every time," he said.
"Now in some cases it may turn out that a crime hasn't been committed, in which case the figures can be changed later. But the crime needs to go on the books straight away so that the crime is properly investigated in every case and the victim receives the services which she or he should have."
'Lapses in leadership'
Police are obliged to inform victims about their decisions but the report found this was not always the case.
Victims may have been under the impression that their crimes were being investigated when they were not, the report said.
It said relatively little firm evidence had been found of undue pressure being put on officers to manipulate figures.
Tom Winsor said the presumption should be that victims should be believed
But in a survey, some officers and staff did say performance and other pressures were distorting their crime-recording decisions, "and when presented with that picture, a number of forces admitted it".
Inspectors were told that pressure to hit crime reduction targets imposed by "middle managers" had the effect of limiting the number of crimes logged.
The report recommended that standard training established by the College of Policing be provided by each force.
'Pressures from workload'
Mrs May said: "It is never acceptable for the police to mis-record crime. Failing to do so not only lets down victims, but the wider public who expect to be able to trust the integrity of police recorded crime."
There had been "utterly unacceptable failings" in the way police forces have recorded crime but matters were improving, she said.
Shadow policing minister Jack Dromey said it was time for Mrs May to "get a grip on this and make urgent changes to the way the police record crime".
Chief Constable Jeff Farrar, lead for crime recording at the Association of Chief Police Officers, said: "Pressures from workload and target culture, use of professional judgment in the interests of victims, lack of understanding of recording rules or inadequate supervision can all lead to inaccurate crime recording.
"There have been allegations of improper practice, such as dishonest manipulation, in crime recording, however, the biggest and most in-depth inspection ever conducted by HMIC could not find anyone to come forward with any firm evidence to support this."
Ch Supt Irene Curtis, president of the Police Superintendents' Association, said recorded crime was a measure of demand on police resources rather than police performance.
"HMIC's report covers a period of at least 12 months ago and recognises that considerable improvements have already been made since that period," she said.
Earlier this year an interim report by Mr Winsor, covering 13 forces, made a similar conclusion that a fifth of crimes could be going unrecorded by police.
An unrecorded crime is classed as one that is reported to the police but not recorded as an offence.
Last month, official figures showed the number of rapes reported to and recorded by police in England and Wales was at its highest ever level.
The Office for National Statistics said there were 22,116 recorded rapes in the year to June, a rise of 29% on the year before.
Separate statistics from the Crime Survey for England and Wales showed overall crime fell by 16% to 7.1 million cases.