The royal said the findings of the Dyson report, which looked into how Bashir was able to secure the interview with Diana in 1995, were "extremely concerning," particularly drawing on its conclusion that the reporter "lied and used fake documents" and "made lurid and false claims about the royal family" in the run-up to the Panorama episode.
In a separate statement from his new home in California, Prince Harry said Diana had "lost her life because of this."
Lord Dyson's report said Bashir was "devious and dishonest" in his use of fake bank statements to obtain access to Earl Spencer, Diana's brother Charles, who then introduced him to Diana.
In the interview, she said the now famous line "well, there were three of us in this marriage, so it was a bit crowded," about Camilla Parker-Bowles, who Charles went onto marry in 2005.
After the program aired, Diana had to divorce Prince Charles, and saw the removal of both her HRH title and security.
In his blistering statement on Thursday evening, Prince William said: "It is my view that the deceitful way the interview was obtained substantially influenced what my mother said. The interview was a major contribution to making my parents’ relationship worse and has since hurt countless others.
"It brings indescribable sadness to know that the BBC’s failures contributed significantly to her fear, paranoia and isolation that I remember from those final years with her.
"But what saddens me most, is that if the BBC had properly investigated the complaints and concerns first raised in 1995, my mother would have known that she had been deceived. She was failed not just by a rogue reporter, but by leaders at the BBC who looked the other way rather than asking the tough questions.
"It is my firm view that this Panorama program holds no legitimacy and should never be aired again. It effectively established a false narrative which, for over a quarter of a century, has been commercialized by the BBC and others."
The 38-year-old added: "In an era of fake news, public service broadcasting and a free press have never been more important. These failings, identified by investigative journalists, not only let my mother down, and my family down; they let the public down too."
Prince Harry's statement said: "Our mother was an incredible woman who dedicated her life to service. She was resilient, brave and unquestionably honest.
"The ripple effect of a culture of exploitation and unethical practices ultimately took her life."
"To those who have taken some form of accountability, thank you for owning it. That is the first step towards justice and truth. Yet what deeply concerns me is that practices like these — and even worse — are still widespread today.
"Then, and now, it’s bigger than one outlet, one network or one publication.
"Our mother lost her life because of this, and nothing has changed. By protecting her legacy, we protect everyone, and uphold the dignity with which she lived her life. Let’s remember who she was and what she stood for."
In his response, which was timed for release at the same moment as his brother Harry's, William also took note of the report's conclusion that the BBC "displayed woeful incompetence when investigating complaints and concerns about the program" and "were evasive in their reporting to the media and covered up what they knew from their internal investigation."
The Dyson investigation was triggered when Earl Spencer raised fresh concerns about the methods used by Bashir to get to his sister, particularly because the earl had not been interviewed by the BBC when it conducted an inquiry in 1996.
Bashir issued an apology after the report was released, but said he remained "immensely proud" of the interview.
He said: "It is saddening that this single issue has been allowed to overshadow the princess’s brave decision to tell her story, to courageously talk through the difficulties she faced, and to help address the silence and stigma that surrounded mental health issues all those years ago."
The BBC has returned its Bafta, which it won in 1996 for the interview, and wrote to members of the royal family, including Charles, William and Harry and Earl Spencer, to apologize,
Speaking on a new Panorama program, which was broadcast on Thursday after the release of the Dyson report, Earl Spencer said: "The irony is that I met Martin Bashir on [Aug. 31] 1995, because exactly two years later she died, and I do draw a line between the two events.
"It’s quite clear from the introduction that I sat in on [Sept. 19] 1995, everyone was going to be made untrustworthy, and I think that Diana did lose trust in really key people.
"This is a young girl in her mid-30s who has lived this extraordinarily turbulent and difficult time in the public eye.
"She didn’t know who to trust and in the end, when she died two years later, she was without any form of real protection."
Earl Spencer was approached by the Mail On Sunday in 1996 after it discovered fake bank statements were used by Bashir, but he declined to speak to them because he was settling into a more anonymous life in South Africa at the time.
However, the BBC conducted an internal investigation and failed to get in touch with him, something Lord Dyson heavily criticized in his report.
Lord Dyson said the 1996 probe was "woefully ineffective" and said they "did not scrutinize Mr. Bashir’s account with the necessary degree of scepticism and caution."
Former director-general Lord Tony Hall, who was director of BBC news and current affairs when the Diana interview was screened, also apologized, saying he accepted the findings of the report and that the 1996 investigation "fell well short" of what was expected.
Lord Dyson's report also concluded the princess would have been likely to have given an interview to the BBC anyway, but suggested she may have spoken to then-diplomatic editor Nicholas Witchell rather than Bashir.
The princess, who died in 1997 at the age of 36, said she stood by the interview in a letter which was shared with the inquiry.
She wrote to the BBC in 1995 to say: "Martin Bashir did not show me any documents, nor give me any information that I was not previously aware of. I consented to the interview on Panorama without any undue pressure and have no regrets concerning the matter."
The letter was sent when BBC executives asked for evidence she had not been shown the statements. However, Earl Spencer's concern was that he would not have introduced her to Bashir if he had not been shown the statements.
Bashir told the 1996 inquiry that he had not shown them to anyone.
Harry, 36, is set to next join his brother in London later this year when they are to unveil a statue of Diana in the sunken garden of Kensington Palace.
The event is planned for July 1, which would have been her 60th birthday.
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