The criticism from the EU Committee of the House of Lords -- which scrutinises the British government's EU policies -- comes as a ceasefire falters between pro-Russian rebels and Ukrainian forces.
Britain and the European Union are guilty of "sleepwalking" into a crisis in Ukraine, a scathing report from a British parliamentary committee said on Friday.
Kiev and the West accuse Russia of arming the insurgents and sending soldiers into Ukraine -- something Russian President Vladimir Putin denies.
The committee "believes that the EU, and by implication the UK, was guilty of sleepwalking into this crisis," said committee chairman Christopher Tugendhat.
"The lack of robust analytical capacity, in both the UK and the EU, effectively led to a catastrophic misreading of the mood in the run-up to the crisis."
A report by the committee said the EU's relationship with Moscow had long assumed an "optimistic premise" that Russia was on the path to becoming more democratic.
It blamed a decline in expertise on Russia in Britain's foreign office and other EU ministries for an inability to give an "authoritative response".
"The government has not been as active or as visible on this issue as it could have been," the report said.
It is the latest blow to the administration of David Cameron over the issue, after the prime minister was described as "a foreign policy irrelevance" in the crisis by Britain's top commander in NATO, General Richard Shirreff.
The foreign office rejected the criticism.
"The UK has played a leading role in supporting Ukraine's right to chart its own future by ensuring that the EU imposed tough sanctions on Russia for seeking to dictate these choices," a spokeswoman said.
The office "has strengthened its expertise on Russia and the region and will continue working to ensure a strong and united response to Russian aggression," she added.
On Thursday, Britain's defence minister warned that EU NATO members Estonia, Latvia, and Lithuania could be the next target of Russian interference.
After his comments, Russian bombers were spotted near to British sovereign airspace on Thursday, the latest incident in a trend seen as a show of strength by Russia.
Cameron this week warned that sanctions on Russia could last for "many years to come" if Russia did not back down.