A disproportionate number of black people are taken into custody by police, especially after being stopped and searched in the street.
But both the police and the Crown Prosecution Service were "significantly" more likely to decide to drop any action against them.
The report, looking at the fate of suspects taken into police custody, said the data did not definitely point towards racial discrimination among officers.
But it concluded: "The possibility must be considered that, where the defendant was from an ethnic minority group, the police were more likely to submit for prosecution cases in which the evidence was weaker than average, or where the public interest was against prosecution."
In a study of 4,250 people arrested or detained between 1993-4, 79 per cent were white, 13 per cent black and 6 per cent Asian.
The number of black people arrested was up to seven times their proportion in the local population.
Some 54 per cent of the sample were unemployed.