Pilots experienced several problems with the aircraft in the days leading up to the October 29 crash, investigators said - including a faulty airspeed sensor, altitude indicators and angle-of-attack sensors that should have grounded the plane.
They recommended that Lion Air, a fast-growing low-priced airline based in Jakarta, ensure that pilots follow proper procedures "to improve the safety culture".
Investigators told reporters at a news conference they were still struggling to understand why the plane crashed into the Java Sea, killing all 189 people aboard.
Tjahjono said that due to the small size of the debris found and loss of the plane's engine blades, investigators determined that Flight 610 did not explode in the air, but was in "good shape" before it crashed 13 minutes after takeoff.
But pilots have complained that Boeing did not warn them that, in case of a nose being forced down improperly, the MCAS requires a different response from pilots than the system used on older plane models.
In a statement following release of the report, US-based Boeing declared that the MAX, its newest plane, is safe.
The report provided new recommendations to Lion Air on safety on top of earlier recommendations about the flight manual that have already been implemented by Boeing.
With the sensor insisting the nose was too high, an automatic feature kicked in sending the plane plunging downward as the pilots wrestled to regain control.
If the automatic system kicked in and "the pilot didn't know what was happening", there was a risk it would confuse the pilots, he added.
However they did note that the aircraft was still in service despite a fault with the airspeed indicator.
The report itself does not state that the plane was not airworthy, but it did outline technical problems with the plane, including an issue with the plane's automated anti-stall system.
Wednesday's preliminary report recommends that Lion Air review its safety culture while the investigation continues, and while officials search for cockpit voice recorder (CVR), which is believed to be buried under mud on the ocean floor. Its new automated system pushes the nose down if a sensor detects that the nose is pointed so high the plane could go into an aerodynamic stall.
Within 90 seconds of takeoff, the co-pilot asked air traffic control to confirm air speed and altitude.
"I am really surprised if Boeing has not shared all the flight performance parameters with pilots, unions, and training organisations", University of Leeds aviation expert Stephen Wright told AFP, adding that "a deliberate omission would have serious legal ramifications".
The tragedy was the first involving Boeing's latest model of the 737 series, 737 MAX, which entered service a year ago. That enabled them to restore control and land safely.
The plane experienced technical problems in four earlier flights.
Indonesia's aviation safety record has improved since its airlines, including national carrier Garuda, were subject to years-long bans from U.S. and European airspace for safety violations, although it has still recorded 40 fatal accidents over the past 15 years.
"The FDR recorded that the plane's stick shaker was active prior to and during the flight from Denpasar, Bali, to Jakarta the night before the accident", Nurcahyo said. It is flown or is on order by close to 40 airlines, with Lion Air in the process of receiving more than 200 of jets.
Crash investigators will attempt to reconstruct the crash at a Boeing facility in Chicago.