Peter Moorhouse, chairman of the PCA, said that racist attitudes by some Scotland Yard officers were responsible for the breakdown in relations with Stephen's parents, Neville and Doreen. He said detectives gave the impression that the 18-year-old was probably involved in drugs or gang fighting.
Mr Moorhouse's comments, in an interview with The Independent, are a severe blow to Sir Paul Condon, the Metropolitan Police Commissioner, and his force, which is still reeling from the catalogue of blunders revealed at the public inquiry into the Lawrence affair.
Stephen was stabbed to death at a bus stop by a white gang in Eltham, south-east London, in 1993. While the Metropolitan Police has admitted that its officers were grossly incompetent, it strongly denies allegations of racism.
Mr Moorhouse said: "If you ask the [Police Complaints] Authority is there a racism problem in the Metropolitan Police, the answer has to be yes. I suspect most large urban police forces have that same problem to a greater or lesser degree."
Commenting on the PCA's examination of the Lawrence murder inquiry, he said: "We did not find hard evidence that overt racism impeded the investigation." But he added: "That's not to say there's not institutionalised racism in the Met."
Mr Moorhouse cited examples in the Lawrence case. "There was no appreciation that there was a different culture in areas, such as grieving within different communities ... often in Afro-Caribbean communities sympathy is expressed by family and friends gathering at the home of the deceased's relatives," he said.
"So when the liaison officer turned up and there were family and friends there it was seen as a form of preventing the police having access to the family."
He said the police expected the family to make themselves available on their terms. "This was the wrong way round."
Mr Moorhouse added that the police also failed to make clear that they viewed the murder as a racist attack and that as a routine part of the inquiry they needed to make inquiries into the background of the victim.
"Instead, that was taken by the Lawrence family, probably with some justification, [as alleging] that their son was involved in drugs or a gang. The family felt there was some kind of slur on Stephen. The police failed to get across that they knew their son was a fine, upstanding young man."
The inquiry is expected to produce a final report towards the end of the year.
Mr Moorhouse is also concerned that some ethnic minorities are afraid to make official complaints because they fear being harassed by officers.Reuse content