The BBC Trust report examined the corporation's news coverage on television, radio and online.
It found "strong audience approval" for much of its work, but evidence showed young audiences, as well as women, ethnic minorities and people from working-class backgrounds, were less likely to tune in and did not feel the BBC reflected their experiences.
The review stated: "Our research found a clear view from under-served parts of the audience that much of BBC News is distant from their lives, both in tone and subject matter."
Research found BBC News reached 85.1% of UK adults aged 55 and over, compared to 70.7% of people aged 16 to 34.
It also showed that the reach of BBC News fell by 14% among 16 to 24-year-olds in the 10 years from 2003.
The report also said the corporation's current affairs shows needed to "do more to cover stories and issues which stand out".
It found audiences rated its rival Channel 4 News more highly for investigative journalism and stated: "The challenge facing the BBC's Current Affairs is therefore to make greater impact."
The findings come after a troubled few years for flagship shows including Panorama and Newsnight.
Panorama was criticised after filming undercover during a student trip to North Korea, while Newsnight's dropping of a report into Jimmy Savile's sex crimes plunged the BBC into crisis and cost George Entwistle his job as director-general.
The Trust, the BBC's governing body, said the review found there was no need for "radical change in editorial direction", but "audiences need to recognise their own lives" in coverage.
The review also said audiences wanted "a broader agenda too, better reflecting the diversity of life in the UK today; they want a greater variety of tone, and they want story-telling that is more engaging".
BBC Trustee Richard Ayre said the corporation "must do better than other broadcasters".
He said: "Though news and current affairs are performing extremely well, the issues we've asked the BBC to address will help them to keep pace with changing audiences and unprecedented technological shifts.
"None of this is about radical or sudden changes in editorial direction, it's simply ensuring the BBC is fleet of foot in responding to the challenges ahead."
A BBC spokeswoman said many of the report's findings "mirror areas which we have already identified as key priorities and have started taking steps to address".
She said: "We're delighted the report has found audiences regard our journalism as very high quality and that they rate it as more trustworthy and better informed than any other provider.
"The key actions around audience consumption, diversity, current affairs and international reporting mirror areas which we have already identified as key priorities and have started taking steps to address. We'll look at the recommended actions as part of the on-going process of developing our strategic plans".