The Kremlin complained of a “gross provocation” after the official probe found the Russian leader was likely to have signed off the fatal poisoning of the dissident spy with radioactive polonium in London in 2006.
It prompted fresh acrimony over an episode that sent relations between the two countries into the deep freeze for more than five years.
The Government summoned the Russian ambassador and announced that the two men who allegedly carried out the killing – Andrei Lugovoi and Dmitri Kovtun – would have their assets frozen.
But the Litvinenko family’s barrister warned it would be “craven” if the Prime Minister avoided substantial reprisals due to diplomatic considerations over crises in Syria and Ukraine.
Speaking at the World Economic Forum in Davos, Switzerland, Mr Cameron insisted Britain was “toughening up” its response to Russia.
He added: “Do we at some level have to go on having some sort of relationship with them because we need a solution to the Syria crisis?
“Yes, we do but we do it with clear eyes and a very cold heart.”
The publication of the long-awaited report drew a blistering response from Russian ambassador Alexander Yakovenko.
Branding the inquiry a “whitewash” minutes after a meeting at the Foreign Office, he said: “This gross provocation of the British authorities cannot help hurting our bilateral relations.”
Mr Litvinenko died aged 43 three weeks after he drank tea laced with polonium 210 at the Millennium Hotel in Mayfair, central London.
The revelation that the father-of-three had been poisoned with a radioactive substance triggered a major security alert.
A £2.2 million inquiry into the former KGB agent’s death was finally held last year following a long battle by his widow Marina.
Sir Robert Owen’s report detailed the episode over more than 300 pages, finding that Lugovoi and Kovtun were probably acting under the direction of Moscow’s FSB intelligence service when they placed polonium 210 in a teapot at the hotel’s Pine Bar on November 1 2006.
But it was his final, 18-word conclusion that made headlines around the world.
Referring to then-FSB chief Nikolai Patrushev alongside Mr Putin, the former judge wrote: “The FSB operation to kill Mr Litvinenko was probably approved by Mr Patrushev and also by President Putin.”
Sir Robert pointed to Mr Litvinenko’s work for British intelligence, criticism of the FSB and Mr Putin, and his association with other dissidents such as Boris Berezovsky as likely motives for the assassination.
There was also “undoubtedly a personal dimension to the antagonism” between Mr Putin and Mr Litvinenko.
Tensions dated back to their only face-to-face meeting in 1998, when Mr Putin was head of the FSB and Mr Litvinenko wanted him to bring in reforms.
The dissident made “repeated highly personal attacks” on the Russian leader after seeking asylum in the UK in 2000, including an allegation of paedophilia in July 2006.
Sir Robert wrote: “I am satisfied that, in general terms, members of the Putin administration, including the president himself and the FSB, had motives for taking action against Litvinenko, including killing him, in late 2006.”
Lugovoi and Kovtun are both wanted by UK authorities but Russia has refused to extradite them. The pair are said to have tried to poison Mr Litvinenko at a meeting a fortnight before he ingested the fatal dose.
Lugovoi has been “lionised’ in Russia since the killing, receiving an award from Mr Putin.
Scotland Yard’s investigation remains open and European arrest warrants remain in place for the two men.