The Police Investigations and Review Commissioner (Pirc) said armed officers were deployed in Edinburgh just after midnight on July 22 last year after an unidentified man reported that five men were outside his flat armed with guns, Tasers and knives.
Four armed response vehicles (ARVs) and nine firearms officers were deployed to that incident but found no trace of any men or weapons.
Over the next hour and a half, armed officers were deployed on seven occasions, pointing their weapons at a number of people in a way that was "unwarranted," the watchdog said.
The Pirc report found that the only evidence at that time to connect any of five people detained, to any of the incidents, was that of the unidentified man.
The report detailed that officers missed numerous opportunities to identify this person despite officers having face to face contact with this man on two occasions.
The Pirc said: “While these were fast moving events which related to a number of significant issues, it resulted in four armed response vehicles and nine firearms officers being deployed on seven occasions and police pointing their guns at eleven people on three separate occasions over a period of less than an hour and a half.
“A number of these people were detained and searched on the strength, principally of allegations made by an unidentifiable male and this action in a number of instances appears to have been entirely unwarranted.
“The recommendations have already been discussed with Police Scotland and I know that senior officers have already taken steps to implement some of my recommendations.”
Chief Superintendent Matt Richards, head of specialist services, said: "The nature of spontaneous firearms incidents means they require time-critical decision making, often based on information from the public that is incomplete or continually changing.
"Our firearms officers are trained to the very highest standards so they are fully prepared to handle professionally and appropriately the many challenging situations they face on a daily basis.
"The officers involved in responding to this incident were all acting in good faith in what was a difficult and fast-moving situation. However, it is clear that on this occasion it was not handled well.
"A thorough review took place following the incident and a number of measures were put in place to address the issues that have now been identified by the PIRC.
"We are also writing to the individuals involved to apologise and I want to do that again publicly now."