"Serious shortfalls" were identified at Tameside General Hospital when the Care Quality Commission (CQC) visited.
Staff lacked understanding of mental health laws and found one patient who had been unlawfully detained for "several days", the CQC said.
The NHS trust said it was working hard to make improvements.
Interim chief executive Karen James said issues raised by the inspection, including the safeguarding of vulnerable adults, additional training and staff shortages, were being addressed.
The CQC said a number of wards and the medical assessment and admissions unit did not have enough staff, leaving medics rushing to complete tasks.
Elsewhere in the hospital, some patients were not being treated in a dignified way, the inspection found.
The six-day inspection took place in January.
Tameside was one of a number of hospitals investigated for having a high mortality rate in the wake of the Stafford Hospital scandal.
Health Secretary Jeremy Hunt announced Tameside and 10 other trusts had been put in special measures due to "fundamental breaches of care".
Malcolm Bower-Brown, the CQC's regional director for the north, said changes were needed to ensure patients received the care they were entitled to.
"Although we were pleased to find improvement in some areas since our last inspection, our inspectors found a number of serious shortfalls against national standards," he said.
"We will return shortly to check that the necessary changes have been made and can be sustained for the future."
The trust said it took the report's findings seriously.
A hospital placed in special measures last year has failed to meet eight of the 11 national safety standards during an unannounced inspection.