Inspectors found prosecutors were bombarded with new initiatives, forcing them to neglect their core duties of bringing criminals before the courts.
Mismanagement of cases means many more are dropped either before or during trial than in the rest of England and Wales.
Overall crown court results were "substantially worse" than the national average, with rape prosecutions were 15% below the rest of the country, the report said.
It found defendants in the capital were more likely to walk free because their case was dropped than to be found not guilty by a jury.
The inspectors said "initiative overload" came from CPS managers and central government, including 10 Downing Street.
Major question marks were also raised about specialist or "champion prosecutors" who are supposed to deal with high profile crimes such as rape.
In some areas these were "little more than a title" and "did not lead to a premium service", the report said.
A strategy for tackling violence against women was treated simply as a "restatement" of existing priorities, the report said.
Such were the failings uncovered by Her Majesty's Crown Prosecution Service Inspectorate that a full inspection of the London area was left incomplete.
Of the 20 out of 33 boroughs that were examined only one was rated good, with seven fair and 12 poor, the lowest standard.
London is the largest CPS area and handles nearly one in five of all prosecution cases in England and Wales.
Case work involving the most high profile crimes going to the Old Bailey was praised, but preparation of routine crown court cases displayed a "lack of intellectual rigour", the report said.
Often cases were ignored until a few days before the start of court proceedings before being addressed.
Gathering evidence was regarded as "bureaucracy" instead of an essential part of the prosecution process, leading to delays in approaching witnesses.
Chief inspector Stephen Wooler said the findings were "disappointing and worrying".
He said top-down initiatives were "stretching resources at the front line in a way that was simply not sustainable".
Half of CPS staff in the capital were found to have been granted flexi-time arrangements, damaging the service's performance.
As a result some boroughs struggled to staff courts and offices on Mondays and Fridays because employees were off on long weekends.
In one borough sickness levels averaged 26 days per year. The report also uncovered high levels of staff turnover. Hammersmith in west London had seven chief prosecutors in one year.
Last year 15% of London Crown Court cases were dropped before trial compared with 11.6% nationally.
Hundreds of other legitimate cases failed even to make it before a judge.
There were 437 cases dropped at magistrates' court simply because the prosecution was not ready and an adjournment was refused.
Although these can be resumed inspectors said they rarely were.
The inspectors said the CPS was at least 42 lawyers short of the number it needed in London.
Alison Saunders, the new chief prosecutor for London, said more staff are being moved to the front line and a new set of service standards would be put in place from next month.
She said: "This report does not make easy reading for us. It confirms the shortcomings that we had already identified and have begun to address.
"In recent years, CPS London embarked on an ambitious and groundbreaking programme of new projects and initiatives, all of which will deliver, or have already delivered, benefits.
"Implementing those changes could have been handled better and we will now give those initiatives time to embed before they bring the longer term benefits for London which they were implemented for in the first place."
Keir Starmer, the Director of Public Prosecutions, said he was confident the performance of the CPS in London could be "turned around".
He said: "I am fully aware that CPS London needs to perform much better than it does now and making that happen is a process which I will be closely involved with."
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