The report followed an investigation by the State Council evaluating the cause of the August blast in the northern city of Tianjin that left at least 165 dead.
Industrial accidents are common in China where safety standards are often lax, but the massive blast sparked widespread anger over a perceived lack of transparency by officials about its causes and environmental impact.
The blast, which caused over USD 1 billion in damages, was caused by improper chemical storage by Tianjin Ruihai International Logistics, according to the report published on the State Administration of Work Safety website.
But the underlying cause was that government bodies in charge of the port, up to the ministerial level, routinely ignored or violated laws and regulations regarding chemical storage, according to the report.
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It added that some officials connected to the explosion were guilty of "corruption" and "abuse of power" and recommended the 123 people, including five at the ministerial level, face disciplinary action.
Thousands of tonnes of hazardous chemicals were stored at the warehouse, some 600 metres (2000 feet) from residential buildings. Chinese regulations say hazardous materials should be stored at least 1,000 metres away from homes.
The blast released clouds of toxic chemicals into the air and created a large pool of contaminated water, and the report recommended continued monitoring of long-term health and environmental damage.
A spate of industrial accidents in recent years has raised concerns about the enforcement of residential zoning regulations, government transparency and adequacy of firefighter training in China.
"How could no one get the death penalty?", one commenter wrote.