The FAA needs to adopt a more realistic view of how pilots react under such scenarios as they certify planes, the National Transportation Safety Board said.
The report from the independent government agency comes more than six months after the 737 MAX was grounded globally following two fatal crashes which killed 346 people.
"We saw in these two accidents that the crews did not react in the ways Boeing and the FAA assumed they would," NTSB Chairman Robert Sumwalt said.
"Those assumptions were used in the design of the airplane and we have found a gap between the assumptions used to certify the MAX and the real-world experiences of these crews, where pilots were faced with multiple alarms and alerts at the same time."
In both the Lion Air and Ethiopian Airlines crashes, pilots had difficulty controlling the plane once a flight handling system called the Maneuvering Characteristics Augmentation System was activated based on erroneous signal readings, according to preliminary investigations.
Boeing did not fully brief pilots on the MCAS system until after the Lion Air crash in October 2018.
Boeing testing of the system under the FAA's oversight failed to take into account the cockpit chaos that ensued due to myriad alerts, the NTSB said.
"Multiple alerts and indications in the cockpit can increase pilots' workload and can also make it more difficult to identify which procedures the pilots should conduct," the NTSB said.