Anthony Pierce, who earlier this year was jailed for historical sexual abuse of another boy, allegedly confessed to the report author what is described as a "criminal offence" while he was a parish priest.
The document was written months before he became Bishop of Swansea and Brecon in 1999 and the church held the report - which Pierce asked a "friend" to write - for 11 years before passing it to police.
The Church in Wales said it did not commission the report and the document would form part of a review into how they handled the claim.
The handwritten 25-page document said the abuse happened in 1990 and stated Pierce, who is now 84, felt "intensely guilty" and "could not escape the reality that he was an adult" while the victim was a child.
"He was frightened of his own shame being made public, and of losing his ministry," the report reads.
The report was written in February 1999, just two months before Pierce became Bishop of Swansea and Brecon, one of the Church in Wales' most senior positions.
We're calling his alleged victim Dean to protect his identity. Dean - who has since died - attended Pierce's old church near Swansea in south Wales.
The report goes on to claim Pierce - a priest in his late 40s at the time - was "naive" and "had no defence" against 15-year-old Dean, who is described in the report as "mercurial" and "very attractive".
Lawyers acting for Dean's mother have said the document appears to be a "character assassination" of both him and his family, to keep Pierce beyond reproach.
Dean's mother had reported the allegation twice to the church - the first time in 1993, complaining to the then Bishop of Swansea and Brecon the Rt Rev Dewi Bridges.
The document said it was after this allegation Pierce admitted the "criminal act" to the report's author.
She also raised it again in January 1999, the month before the report was written and three months before Pierce succeeded Mr Bridges as Bishop of Swansea and Brecon in the April.
The allegation wasn't reported to police until 2010 – two years after Pierce had stepped down from his nine-year tenure as bishop.
The Church in Wales said it reported the claim to police again in 2016, as it submitted documents – including the handwritten report - to the Independent Inquiry into Child Sexual Abuse. But, by then, Dean had died.
A BBC investigation into the Church in Wales previously revealed allegations against Pierce reached the desk of his bishop as early as the mid 1980s, but the church found no record of him being disciplined.
Lawyers acting for Dean's family have said it had caused them "immense distress".
"It's designed to put anyone investigating the case off giving Dean's account any credibility," said David Greenwood, a solicitor who specialises in child abuse claims.
"It's brought up this new revelation that someone was trying to cover it up."
The report focuses on Dean's childhood and sexuality, and is largely derogatory in nature. It has been obtained by the BBC ahead of a review into how the Church in Wales treated the allegation involving Dean.
The BBC understands Pierce asked the author to prepare the report so that it could be passed to a senior cleric in the church. It is not known who saw it or what action was taken.
In correspondence seen by the BBC, a church employee said: "It should never have been written from what is clearly highly confidential information and certainly should not have formed part of any decision-making process."
The report said that Pierce was "naive and inexperienced in coping with anybody who treated him in this way".
"He was confused and mesmerised and had no defence against such a bold attack," it added.
"I am not condoning what Pierce did but trying to see how it happened.
"I do not think for a moment, that Dean was being malicious. He was just being himself and exploring life and his own sexuality."
The report described how Pierce "maintained an invisible barrier around himself.... and Dean effectively crashed straight through that barrier".
The Church in Wales said the report formed an "important part" of their review, which is due to be published in the new year.
The BBC wrote to Pierce in prison but he declined to comment.
Pierce was sentenced to four years and one month earlier this year after admitting to five counts of indecent assault on a separate child between 1985 and 1990.
"The letter was written by a friend of Anthony Pierce and was not commissioned by the church," said a Church in Wales spokesperson.
"It forms an important part of the evidence of the review, where it is dealt with in a thorough and detailed manner, and where the other questions that have been asked will be answered with full context."