By law, young people with learning disabilities or autism detained in mental health hospitals must have treatment that is necessary, appropriate and available.
But the inquiry, launched in January, heard evidence of "a significant increase in distress and a worsening of symptoms for those detained, particularly where segregation and restraint have been used".
"We are concerned that a very broad approach has been taken to the 'appropriate medical treatment' requirement... and the approach appears to be that the most basic provision of care satisfies this test," the committee says.
"We consider the human rights of many of those with a learning disability and/or autism are being breached in mental health hospitals."
One young man told the inquiry: "I did not know what was happening.
"Looking back at it now, it does not feel real. It feels like some sort of nightmare.
"It was not a safe place. It was not a treatment room. I got no assessment or treatment done.
"There was no care. I was just put in this room and I lay there and went to sleep."
Another had his arm broken in a restraint, according to his mother. "His arm was wrenched up behind his back until the bone snapped. He was not then taken to accident and emergency for 24 hours even though his arm was completely swollen," she said.
Another mother said her son had been kept in isolation for up to nine hours at a time.
"The rule was that he could not leave until he was quiet," she told the inquiry.
"With his anxiety and sensory presentation, there was no way this was possible.
"He started to bang his head against the wall and would bite the wood in the doorframe out of desperation."
Too often, families are excluded from decision-making and when they try to intervene are viewed as hostile and a problem, which is unacceptable, the report says.
Families must be recognised as "human-rights defenders", it says.
The committee says it has "lost confidence that the system is doing what it says doing", while the regulator, which should be a "bulwark" against abuses, is failing and in urgent need of reform.
The MPs and peers also say they have no confidence government targets to reduce the number of people with learning disabilities or autism in mental-health hospitals will be met.
a special No 10 unit to safeguard the human rights of young people with learning disabilities and autism
an overhaul of inspections, to include covert surveillance and unannounced visits at night and weekends
only individuals who will benefit from treatment are detained in mental hospital
families are fully involved in decisions
"This inquiry has shown with stark clarity the urgent change that is needed and we've set out simple proposals for exactly that," Ms Harman said.
"They must be driven forward urgently."
Ian Trenholm, chief executive of the Care Quality Commission, which regulates health and social care services in England, said many of the report's recommendations relating to the watchdog were already under way, "although we are clear there is much still to be done".
Mr Trenholm said an independent review of the CQC's regulation of mental health hospitals had been commissioned and the findings would be used to strengthen this work.
"We know we need to improve how we regulate mental health, learning disability and/or autism services so we can get better at spotting poor care and at using the information people give us," he said.
"We are working hard to improve and we want to involve people, families, carers and stakeholder organisations to ensure we get it right."