The report, written by the commission that audits the city's hiring practices, was leaked to daily French newspaper La Presse.
The report says one-third of managers hired in Montreal last year were hired "arbitrarily" without the jobs being properly posted.
It says there are problems with impartiality and transparency since city bureaucrats refused to hand over documents for verification by the commission.
"I was astounded," said director general Guy Hébert. "It's completely false."
He suggests that people with their own agendas fed "half-truths" to the commission because they are upset by his attempts to make the city's processes more transparent.
"I don't understand the motives behind producing a report like this one," he said.
The information prompted Quebec's Municipal Affairs Minister Sylvain Gaudreault to call Montreal Mayor Michael Applebaum for an explanation.
A spokesperson at Gaudreault's office told CBC News the minister was satisfied with Applebaum's response.