One impoverished Afghan farmer with no ties to militants was held for two years without trial in a case of mistaken identity, the documents showed.
But US authorities in 2004 decided to release Abdullah Mehsud, a Taliban extremist who duped his interrogators into believing he had been conscripted by the insurgents as a driver.
"Detainee does not pose a future threat to the US or US interests," said a 2003 document, quoted by the Times.
Mehsud, who gave a false name to his American interrogators, was sent back to Afghanistan where he organized a Taliban unit to assault US troops, planned an attack on Pakistan's interior ministry that claimed 31 lives, oversaw the kidnapping of two Chinese engineers and set off a suicide bomb in 2007 in Pakistan -- winning praise from Al-Qaeda chief Osama bin Laden.
President Barack Obama's administration, which has tried to close the controversial Guantanamo prison, denounced the "unfortunate" release of the classified documents, part of a massive cache of secret memos passed to WikiLeaks last year.
The government said in a statement the Obama and Bush administrations had "made every effort to act with the utmost care and diligence in transferring detainees from Guantanamo."
Human rights groups, who have portrayed Guantanamo prison as a legal black hole, said the documents showed the need for courts to review the evidence against each detainee.
"These documents are remarkable because they show just how questionable the government's basis has been for detaining hundreds of people, in some cases indefinitely, at Guantanamo," said Hina Shamsi of the American Civil Liberties Union.
"The one-sided assessments are rife with uncorroborated evidence, information obtained through torture, speculation, errors and allegations that have been proven false," Shamsi said in a statement.
The New York Times was among a group of US and European media outlets that obtained the more than 700 secret documents, including The Washington Post, National Public Radio, The Daily Telegraph, El Pais, Le Monde, Der Spiegel and La Repubblica.
In another revelation, one document reportedly showed that a top detainee, senior Al-Qaeda commander Khalid Sheikh Mohammed, told interrogators a nuclear bomb had been hidden somewhere in Europe to be detonated if bin Laden is ever caught or killed.
Out of the 779 people who have passed through the Guantanamo prison, at least 150 detainees were innocent Afghans or Pakistanis, including drivers, farmers and chefs, according to The Daily Telegraph.
They were rounded up as part of frantic intelligence-gathering in war zones and then detained at Guantanamo for years due to incorrect information or simply for being at the wrong place at the wrong time, the British daily said.
Overall, US military officers considered only 220 of all the suspects detained at Guantanamo to be dangerous extremists.
Another 380 were deemed to be low-ranking foot soldiers who traveled to Afghanistan or were part of the Taliban, the Telegraph wrote.
In dozens of cases, senior US commanders reportedly concluded that there was "no reason recorded for transfer" to Guantanamo Bay.
Of the 172 prisoners who remain at Guantanamo, 130 have been rated as posing a "high-risk" threat.
The New York Times said the files revealed little about the harsh interrogation tactics used at Guantanamo that sparked condemnation around the world.