Charles Moore, the former editor of the Daily Telegraph, who published the first part of his biography of the former Tory Prime Minister this year, said Mrs Thatcher "did not understand what the Union meant from a Scottish or Northern Irish point of view."
Mr Moore, who had access to the former PM's papers and private letters, said she failed to grasp the arguments for devolution in Scotland and that she thought of the Union from a wholly English perspective.
In a session at the Edinburgh International Book Festival, he said: "She did handle Scotland wrong on the whole, and you do pay a penalty for that. One of the troubles of her reputation, is the flipside of success, she was so good at identifying herself with certain measures and types of success, that all actions are attributed to her, including bad actions.
"There is a sort of an exaggerations which has benefited her in some ways and made her reputation suffer in other ways."
He said the Prime Minister had let the question of Scottish devolution become an issue for other parties.
"What she was wrestling with was massive economic problems, so [devolution and Scotland] was a complication, and it was also a source of division within the Tory party, so she wanted to close down the subject of devolution in Scotland, and let it be Labour's problem, and that worked extremely well in the late 1970s," he said.
"But what she lacked was a sort of strategic understanding of the question, and she did not have a feeling for how something might sound to Scots."
Mr Moore added: "Devolution was allowed to wither on the vine was the big problem, the real problem was not thinking about it.
"If you don't think about a big serious problem, others will fill the vacuum."