This report was brought in by special counsel Robert Hur, who was appointed by Mr Biden's attorney general Merrick Garland last year.
President Biden defended his competence during a rare evening address to Americans, at a live appearance from the White House, where he insisted that his "memory is fine".
An angry and emotional Biden had responded back to comments that he was unable to remember key moments in his life, like the date of his son Beau's death in 2015 for example.
"My memory is fine," he said. "There's even reference that I don't remember when my son died. How in the hell dare he raise that?".
On the face of it, this document should have yielded good news for Mr Biden, having cleared him of any wrongdoing in the storing of these classified documents, which he used during his tenure as vice president under Barack Obama.
However, Mr Hur still described Biden in the documents as a "well-meaning, elderly man with a poor memory", while also adding that no jury would have found him guilty, due to his declining mental acuity.
"We conclude the evidence is not sufficient to convict, and we decline to recommend prosecution of Mr Biden for his retention of the classified Afghanistan documents", the report said.
Mr Hur then added that "It would be difficult to convince a jury that they should convict him - by then a former president well into his 80s - of a serious felony that requires a mental state of wilfulness".
On the comment made by reporters in the White House, on his formal remarks, Mr Biden stated, "I am well meaning, and I'm an elderly man, and I know what the hell I'm doing".
"I'm president and I put this country back on its feet," he added. "Take a look at what I've done since I've become president".
Mr Biden also faced scathing criticism from several Republican leaders of the House of Representatives, who called the report "deeply disturbing", and insisted the Mr Biden is "unfit" to be the US President.
They said in a statement, "A man too incapable of being held accountable for mishandling classified information is certainly unfit for the Oval Office".
White House special counsel Richard Sauber and Mr Biden's personal lawyer Bob Bauer defended the president, and branded the comments in the report as neither "accurate of appropriate".
"The report uses highly prejudicial language to describe a commonplace occurrence among witnesses: a lack of recall of years-old events," they said in a letter to Mr Hur. "Such comments have no place in a Department of Justice report".
Joe Biden also pointed out that he had granted five hours of interviews to the special counsel last October, just as he was handling the start of the Israel-Hamas crisis.
