The Scottish Public Services Ombudsman (SPSO) said the man was diagnosed in his early 30s as a likely carrier of Huntington's disease (HD) in 1989.
But despite a new, more accurate genetic test for the disease becoming available in 1993, he was not retested until 2007 – when he was found not to be a carrier.
The ombudsman was told the diagnosis had led the man and his family to make "certain life choices" because of the possibility that his daughters also had the Huntington's gene. One of the daughters and his wife terminated pregnancies because of the risk of the disease being passed on. One daughter was unable to complete her university degree.
The ombudsman upheld complaints about the length of time it had taken NHS Lothian to offer the new test.
The report said the patient – known as Mr C – was tested for HD in 1989 because his mother had the illness, meaning he had a 50 per cent chance of being a carrier.
The incurable condition, which normally begins to develop after the age of 35, leads to serious problems including difficulty speaking and moving, changes in personality and a mental decline.
The test given to Mr C in 1989 found he had a 96 per cent chance of having the Huntington's gene and developing symptoms in later life. By this stage, the patient already had two daughters.
The report said: "It was accepted they were now at a 50 per cent risk of developing HD in later life."
The patient described to the ombudsman the impact the test had on the family, making significant decisions based on the diagnosis "hanging over" them.
Mr C continued to see his doctor for check-ups at the Western General Hospital in Edinburgh to see if symptoms were developing, but none were found.
In 1993, a new test was developed for HD to detect the mutated gene.
The ombudsman said: "Upon raising the possibility of being re-tested with (his] geneticist, she advised there would be no benefit to (Mr C] of undergoing the new test. This discussion is not recorded in Mr C's clinical records."
Mr C was offered the new genetic test in 2007. This showed he did not have the gene, meaning his daughters were not at risk of inheriting it from him after all.
NHS Lothian said the new test was offered to patients who requested it.
The ombudsman said the board's policy of not automatically contacting all patients for retesting was "reasonable", but officials waited too long before offering it to Mr C.
Melanie Hornett, nurse director at NHS Lothian, said: "We are deeply sorry for the anxiety and distress caused to Mr C and his family. This was an exceptional case and we have accepted and implemented the recommendations of the report to prevent a repeat of a similar incident."