The term was the one used by many anti-racism activists who gave evidence to the former High Court judge's public inquiry last year.
A delegation from the Commission for Racial Equality told Sir William that most public bodies are institutionally racist, and they included even the National Health Service.
There have been several strict definitions of the term as well as other labels such as "culturally racist".
Metropolitan Police Commissioner Sir Paul Condon had explicitly rejected the term institutionally racist, saying it did not apply to his force because it would wrongly brand all his officers as bigots.
More recently, Sir Paul appears to have backtracked from that stark denial, saying he could accept the term, depending on how it was defined.
In his report, Sir William defines "institutional racism" as: "The collective failure of an organisation to provide an appropriate and professional service to people because of their colour, culture or ethnic origin.
"It can be seen or detected in processes, attitudes and behaviour which amount to discrimination through unwitting prejudice, ignorance, thoughtlessness and racist stereotyping which disadvantage minority ethnic people."
Crucially for Sir Paul, Sir William makes it clear that institutional racism can result from "unwitting" prejudice rather than conscious or calculated bigotry.Reuse content