More than 1,000 alleged young offenders are wrongly jailed every year because of "fundamental failings" in the youth justice system, prison reformers have said.
The Prison Reform Trust said three quarters of under-18s who are refused bail will later be either cleared at trial or given community sentences.
They said the youngsters should not be locked up in the first place and called for a ministerial review of the system in England and Wales.
Analysis of official figures found around half of all alleged young offenders placed in youth custody by magistrates courts are on remand. The number of children and youths remanded in to custody has increased by 41% in a decade, the PRT said.
PRT director of reducing youth imprisonment Penelope Gibbs said official policy of only jailing children in exceptional circumstances was being "widely ignored".
She said: "It is disturbing that in many parts of the country prison is being used as a convenient place to park innocent children while they await trial. If we want an effective and decent youth justice system which is focused on helping children out of trouble rather than criminalising them, the Government must work with local councils and courts to put a stop to this abuse of the remand system."
The PRT report, "Children: Innocent Until Proven Guilty", argues alleged young offenders should be locked up only if there are fears they could commit a violent offence while on bail.
It said councils should be encouraged to provide alternatives to jail instead of being given "perverse incentives" not to. And magistrates should not be able to lock up children until they are 14 years old, the report said.
A Ministry of Justice spokesman said: "The decision as to whether to remand a young person under 18 to custody is rightly for the courts. Similarly, bail decisions and sentencing in individual cases are a matter for the judiciary who are independent of Government.
"They will make their decisions based on the facts of each individual case. The Government believes that young people should only be sent to custody as a last resort. During the last seven years there has been a 10% decrease in the number of young people remanded to custody."