"We are deeply sorry that this could happen," Jeanette Skjelmose, head of sustainability at Ikea of Sweden, said in a statement.
Following revelations that surfaced in April this year on Sveriges Television's (SVT) Uppdrag Granskning programme, the furniture company initially rejected the claims, but on Friday admitted that prisoners had been used to make its products.
Ikea had commissioned an investigation into the claims by auditors Earnst and Young which concluded that Ikea furniture had been built using East German prisoners.
Releasing a report, Ikea said there were "indications that political prisoners and convicts were partly involved in producing parts or pieces of furniture that were delivered to Ikea 25 or 30 years ago."
"In addition, the investigation showed there were Ikea managers who were aware of the possibility that political prisoners would be used to manufacture Ikea products in the former East Germany," the report added.
While the firm took steps to ensure this did not occur, "it is now clear that these measures were not effective enough," the furniture giant acknowledged.
"At the time, we did not yet have the well-organised control system we have today and clearly did not do enough to prevent this type of production method," the firm said.
Meanwhile, Skjelmose explained a similar incident could not occur given the company's current control systems.
"Using political prisoners in production has never been accepted within the group. During this time, we did not have the well-developed control system and it's clear that it was not enough to prevent the incident," she told the paper.
The Ernst and Young report examined documents from the Ikea archives as well as from the German historical files.
The auditors also carried out some 90 interviews with a variety of Ikea employees, prisoners and witnesses.
But the report has already come under fire.
Klaus Schroeder, a political scientist at Berlin's Free University, said: "It would have been simpler to come and ask us because we are the experts on this subject.
Roland Schulz, vice-president of an association representing victims of the Communist regime in East Germany, dismissed the report as "unscientific."
"Ikea as the guilty party is itself conducting the investigation rather than leaving it to unbiased sources. Therefore we strongly doubt the validity of the results," he added.
He called for historians and political scientists to carry out a more thorough investigation.
According to media reports, Ikea was far from being the only company to employ forced labour in the former Communist East, noting that the mail-order companies Neckermann et Quelle are also alleged to have observed similar practices.
But Rainer Wagner, the president of the UOKG group representing "victims of communist tyranny" told the Berliner Zeitung daily on Friday that Ikea's efforts were "a start" and called on other firms to investigate their past.
The UOKG and other victims' groups have called for a compensation fund to be set up for former forced workers under the East German communist regime.