The Defense AI Reliability and Reporting Act directs the Secretary of Defense to establish a comprehensive, Department-wide program for addressing artificial intelligence incidents and vulnerabilities. This program will centralize the reporting, tracking, analysis, and remediation of issues arising from the development, testing, procurement, fielding, or operation of AI systems within the DoD, aiming to identify recurring risks, failure modes, and systemic weaknesses. Its primary purpose is to support risk mitigation and inform critical decisions regarding AI system safety, security, reliability, and operational effectiveness, including those from human-machine teaming. The program is designed using established safety incident reporting and vulnerability disclosure practices, emphasizing non-punitive reporting and the protection of sensitive information. It requires the designation of an official to manage the program, standardize reports, conduct trend analysis, and issue guidance. Prompt reporting of any covered AI incident —such as unintended harm, operating outside parameters, or failure to disengage—and covered AI vulnerability is mandated, with categorization determining the required response level. For significant incidents or vulnerabilities, the designated official will coordinate responses, which may include remediation, retesting, or deployment restrictions, with Department-wide issues requiring a documented corrective action plan and validation. The bill also establishes a protected disclosure process for good-faith reporting by personnel and contractors, ensuring protection against retaliation and safeguarding sensitive, proprietary, and classified information. Additionally, the Secretary is required to submit annual reports to congressional defense committees from 2027 through 2031, detailing incidents, trends, corrective actions, and specific information on any incidents resulting in loss of life or bodily harm, alongside policy recommendations.