An independent report published Thursday after a monthslong probe found that Bashir acted inappropriately and breached the publicly funded broadcaster's editorial guidelinesin order to gain access to the royal, who famously told him in the November 1995 interview that "there were three of us in this marriage."
The watershed interview was watched by more than 20 million people in Britain and sent shockwaves through the royal family. Months after it aired, Diana and Charles divorced.
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BBC Director-General Tim Davie apologized on Thursday.
“Although the report states that Diana, Princess of Wales, was keen on the idea of an interview with the BBC, it is clear that the process for securing the interview fell far short of what audiences have a right to expect," he said in a statement.
"We are very sorry for this."
The interview came under renewed scrutiny after the release of a documentary by British broadcaster ITV called "The Diana Interview: Revenge of a Princess," which aired last November. It claimed that Bashir had a graphic designer create fake bank statements, which he then allegedly used to convince Diana that royal employees were being paid to spy on her.
Diana's brother, Charles Spencer, tweeted on Nov. 8 that he knew Bashir "used fake bank statements and other dishonesty to get my sister to do the interview."
Spencer also claimed that he found out that the BBC knew about the fake bank statements as well. He demanded the network apologize for the falsified documents that led him to introduce Bashir to his sister.
Just 10 days later, the network appointed Lord John Anthony Dyson, a former Justice of the U.K.'s Supreme Court, to look into the circumstances surrounding the interview.
His investigation also looked at an internal investigation conducted by the BBC after the original broadcast which concluded that Bashir did not coerce Diana into speaking with him.
Thursday's report concluded that Bashir did indeed commission the bank statements and show them to Earl Spencer, Diana's younger brother, to "induce him to arrange the meeting with Princess Diana."
Hours before his findings were released, Charles Spencer tweeted a childhood photo with Diana, alongside the message: "Some bonds go back a very long way."
Bashir went to work for another British network before joining ABC in the U.S., and later MSNBC where he was a news anchor. He went back to the BBC in 2016 and resigned last week as religious affairs editor, after months of ill health.
The BBC revealed last year that the 58-year-old had suffered from serious coronavirus complications and had heart surgery.
He has not publicly commented on the matter.
Both Diana's sons, Prince William and Prince Harry, said they welcomed the investigation as a chance to find out the truth about what had happened.
British police ruled out a criminal investigation into his actions earlier this year, but the independent inquiry's conclusions are likely to have far-reaching implications for the BBC as it also condemned the network's senior executives at the time for falling short of the standards expected.
It comes at a sensitive time for the Royal family amid concerns that the new generation of royals are suffering from media intrusion. Prince Harry and Meghan, the Duchess of Sussex, have repeatedly complained about the tabloid press and won a series of court cases against a number of outlets.
Reuters and the Associated Press contributed to this report
This story first appeared on NBCNews.com.