A commission examining Canada's policy to separate indigenous children from their families says the abuse created a legacy of turmoil.
From the country's formation in the 19th Century until the 1970s, the children had to attend schools where they were stripped of their identity.
Many of the 150,000 children also suffered physical abuse from the staff at the church-run boarding schools.
An interim report says children left the schools "as lost souls".
The Truth and Reconciliation Commission of Canada report, They Came for the Children, says their lives were "soon to be cut short by drugs, alcohol and violence".
It concludes that the schools were an assault on indigenous children, their families, culture and their nations.
Native Canadians remain among the poorest members of society, with many still living on reserves.
The commission was formed as part of a landmark settlement in 2006 that included more than C$2bn (£1.3bn) compensation for surviving former children and their families.
It has already taken 25,000 statements from survivors, visited about 500 communities and has heard from about 100 former school employees.
The schools were set up to assimilate native children into Canadian society.
The report starts with a quote from Hector Langevin, the Public Works Minister of Canada in 1883: "In order to educate the children properly, we must separate them from their families. Some people may say that this is hard, but if we want to civilise them we must do that.''
The federal government acknowledged 10 years ago that physical and sexual abuse in the schools was widespread.
Many students recall being beaten for speaking their native languages and losing touch with their parents and customs.
"It is commonly said that it takes a village to raise a child," said commission chairman Justice Murray Sinclair during a press conference to present the report on Friday.
"The government of Canada took little children away from their villages and placed them into institutions that were the furthest things from a village you could expect," he said
The report said the result was damaged relations within aboriginal families and with Canadian society at large.
It calls for a comprehensive programme of education to help the process of reconciliation.
The report concludes: "There is an opportunity now for Canadians to engage in this work, to make their own contributions to reconciliation, and to create new truths about our country."
A final report is due to be published in 2014.