Ikea says it "deeply regrets" the use of forced prison labour by suppliers in communist East Germany more than two decades ago.
The Swedish furniture giant apologised after commissioning a report into claims political prisoners worked in factories making its products in the 1960s and 70s.
The company says it never condoned the use of forced labour but the report showed it failed to properly vet how its suppliers were operating.
The report concludes that Ikea managers "were aware of the possibility that political prisoners would be used in the production of Ikea products in the former GDR".
"We deeply regret that this could happen," said Jeanette Skjelmose, an Ikea manager.
"The use of political prisoners for manufacturing was at no point accepted by Ikea."
But she added: "At the time we didn't have the well-developed control system that we have today and we clearly did too little to prevent such production methods."
Ikea commissioned accountants Ernst & Young to look into claims aired by a Swedish TV documentary in June but first raised by a human rights group in 1982.
Rainer Wagner, chairman of the victims' group UOKG, said Ikea was just one of many companies that used forced prison labour in East Germany.
"Ikea is only the tip of the iceberg," he told The Associated Press in an interview earlier this week.
Wagner said he hoped that Ikea and others would consider compensating former prisoners, many of whom carry psychological and physical scars.
"Ikea has taken the lead on this, for which we are very grateful," he told a news conference in Berlin, where the report was presented.
Peter Betzel, the head of Ikea Germany, said the company would continue to support efforts to investigate the use of prisoners in East Germany in future.
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