Commissioners found that there was an absence of accountability for new media, and a lack of regulatory parity between print and broadcast media.
While broadcast news was subject to statutory standards, content accessed on-demand or on an app was not subject to the same standards.
The report said these inconsistencies and lack of accountability were likely to become more pronounced with the roll-out of ultra-fast broadband.
In response, the commission recommended the introduction of a single news media standards authority, which would absorb the existing watchdogs - the Press Council, the Broadcasting Standards Authority and the Online Media Standards Authority.
Sir Grant said: "In our view the current system of format-based complaints bodies adjudicating against different standards is inequitable for news producers, confusing for the public, and inconsistent with the realities of technological and content convergence.
"A new level playing field is required."
The standards body would be completely independent of government and the news media industry - it would not be established by statute or funded by the state, and its complaints panel would have no current members of the industry.
The authority would have the power to order publishers to remove material from a website, correct it, allow a person a right of reply, or to publish an apology.
However, it would not be able to recommend other sanctions such as fines or compensation.
Lead Commissioner John Burrows said the authority would be focused on the content of news, not the platform, and therefore journalists' tweets would also come under the scope of the standards body.
Membership to the authority would be voluntary, but only publishers who belonged to it would be eligible for the legal and non-legal privileges and exemptions available to news media - such as the ability to challenge name suppression in court, or belong to the Parliamentary Press Gallery.
Professor Burrows said he expected all mainstream news organisations to become members, and also some high-profile bloggers.
The commission's report also recommended a consistent definition of news media in statutes which related to news organisations.
"News media" would be defined as organisations who generated or aggregated news, opinion, and information, disseminated it to the public regularly, and were accountable to a code of ethics.
Justice Minister Judith Collins said she would examine the report and consult with industry before reporting back later this year.
One part of the review, which dealt with online bullying, has been fast-tracked at the request of Justice Minister Judith Collins.
