Deputy Prime Minister Bill English said the Government was "disappointed" the report had been leaked and confirmed it would be made public later today.
Mr English said the report showed "a number of longstanding issues the Government has been looking at now for a couple of years and it highlights the fact that the legislation for GCSB was probably legally flawed right from the start so the Government will be moving over the next couple of months to make public a comprehensive response to that report".
However there was already "quite a bit of organisation change going on in the intelligence agencies".
The 71-page report found the GCSB may have unlawfully spied on up to 85 people between April 2003 and September last year.
That would contradict GCSB head Ian Fletcher's comments earlier this year that the bureau had not unlawfully spied on anyone other than Dotcom.
Mr Shearer said the report showed "reform is needed".
"John Key can no longer ignore Labour's call for a good hard look at the way all of our intelligence agencies are operating.
"This shouldn't be limited to internal investigation of one organisation. There is an urgent need for a thorough independent review and reform of New Zealand's entire spying network. The GCSB doesn't act alone. It interacts with the police and the SIS.
"There are also serious concerns about the oversight of the agencies from the role of the Inspector-General to the Prime Minister at the very top."
Mr Shearer said media coverage indicated the Kitteridge did not delve into the detail of the Kim Dotcom case, including Mr Key's "knowledge and lack of oversight".
"We would be deeply concerned if this is the case. After all, this is the very reason the report was commissioned in the first place. This issue must not be glossed over."
Labour was concerned the Government would use the review by its own appointee "to try and ram through legislative changes without proper debate among Parliamentarians and New Zealanders".
"We are aware that changes to the SIS legislation are being considered at the moment. Reform is needed. It is something Labour has been calling for. But it must only happen after a robust wide-ranging investigation is carried out across all of our intelligence agencies."
Former GCSB director Sir Bruce Ferguson said media coverage of what was in the report "gels with everything I saw in the draft report".
"I didn't have a great issue with it. I said that to Rebecca. I think it's by and large a well-balanced report."
Sir Bruce, whose term ended in 2010 said he "assumed" he'd signed off on warrants for the bureau to assist the SIS in investigations which were now the focus of the report but he was unaware of any issues of legality when he signed those warrants.
However while he'd seen a draft of the report, he hadn't seen that particular part.
"I was only one of several directors I just happen to be the only mug that's actually making any comment on it."
He said an overhaul of legislation around the bureau and the SIS was "very timely".
The review noted a series of failings had led to the illegal spying, including under-resourcing and a lack of legal staff, Fairfax reported.
But the review found there was no evidence staff had acted in bad faith, and staff were devastated to learn their actions had been unlawful.
The review found the GCSB structure was overly complex and top heavy, while staff who performed poorly were tolerated, rather than dismissed or disciplined, so they would not pose a security risk upon leaving the bureau, Fairfax reported.
The bureau was disconnected from other agencies, kept poor records, and worked under a lack of oversight by its watchdog, the Inspector-General of Intelligence and Security.
The review was critical of the bureau's former deputy director, Hugh Wolfensohn, who acted as its only legal advisor until he resigned over the Dotcom saga last year.
It said he held multiple key roles, which meant he had too much to deal with and spent up to only 10 per cent of his time on legal work, Fairfax reported.
He requested more legal staff but none were appointed, and although two intelligence analysts with legal training were seconded, they were inexperienced and needed to work under supervision.
Ms Kitteridge has recommended an immediate reform of the law governing the GCSB, but noted problems at the bureau could take a year to fix.
Former GCSB director Sir Bruce Ferguson said the issue was how the GCSB Act was interpreted, and he suggested there was no intention of illegal spying.
"As far as I'm aware both agencies, the SIS and the GCSB, worked with full due diligence to work within the law," he told Radio New Zealand.
"One person does not write an act of parliament. He [Hugh Wolfensohn] would have drafted the originals, he would have been a very strong person within the way of structuring it but then Crown Law comes in, the parliamentary drafting comes in and ultimately Parliament itself comes in ... there are a whole series of people that create an act of Parliament," Sir Bruce said.
He described Mr Wolfensohn as a diligent, dedicated and hard-working person.
"At no stage did he come to me or did I actually become aware that we desperately needed more people in there. He seemed to be coping - he was a very capable man," he told RNZ.
The nature of intelligence organisations meant information was compartmentalised, so even those with the highest classification levels were not entitled to have access to anything they aren't directly working on.
"It's not an open organisation, and it never will be."
He had seen a draft of Ms Kitteridge's report, and described it as thorough and well-balanced but having a simplistic understanding of the organisation.
* Read the full Fairfax report here.
