LONDON—Britain’s 2011 military intervention in Libya was based on “erroneous assumptions and an incomplete understanding” of the situation, a panel of lawmakers said in a report due to be published Wednesday in the U.K.

The cross-party parliamentary Foreign Affairs Committee said the U.K. government—led by then Prime Minister David Cameron—failed to identify that the rebels included a significant Islamist element and that the threat to civilians was overstated.

The...