He had twice been a "subject of interest" in MI5 investigations in the years before May's attack, but those investigations were later closed and interest in Abedi was downgraded.
A meeting was due to be held to discuss the potential threat on May 31 - nine days after the attack on the Manchester Arena.
The document was produced after the Home Secretary Amber Rudd asked Mr Anderson QC, the former Independent Reviewer of Terrorism Legislation, to assess and report on the police and security services' internal reviews into the Manchester and London terror attacks earlier this year. The attack at Parsons Green, on 15 September, was not covered by the report.
Among it's other findings was the fact that Westminster attacker Khalid Masood was known to police and MI5 for association with extremists.
"With the benefit of hindsight, intelligence was misinterpreted in 2017", said Anderson.
The report also reveals that the London Bridge atrocity mastermind was under "active investigation" and had been watched by MI5 and police since 2015.
The four attacks killed a total of 36 people and wounded 200 others.
Butt had been investigated for two years.
After the bombing, which left 22 people dead, Scotland Yards internal review found that better resources and infrastructures were needed.
"It is conceivable that the Manchester attack in particular might have been averted if the cards had fallen differently", Anderson stated. "But though investigative actions were for the most part sound, many learning points have emerged", said Anderson.
MI5 had plans to revaluate Abedi as a person of interest, but the Manchester attack took place before he was reexamined.
On two occasions, MI5 had received intelligence on Abedi "whose significance was not fully appreciated at the time", Anderson said, according to the Telegraph. "No free society can offer immunity from terrorism, or any other kind of crime".
Salman Abedi, a 22-year-old Briton born to Libyan parents, blew himself up at the end of a show by USA singer Ariana Grande in the deadliest militant attack in Britain for 12 years.