Children who commit acts of harmful sexual behaviour should not be treated as "mini sex offenders", a report says.
A parliamentary inquiry, supported by charity Barnardo's, says they should be seen as children "first and foremost".
It also said children who sexually abuse other children have often suffered abuse and trauma themselves.
Barnardo's Javed Khan said treating children as mini sex offenders "prevents them being rehabilitated and living positive lives".
For its report, the inquiry used a description of harmful sexual behaviour as one where children and young people "engage in sexual discussions or activities that are inappropriate for their age or stage of development, often with other individuals who they have power over by virtue of age, emotional maturity, gender, physical strength, or intellect and where the victim in this relationship has suffered a betrayal of trust".
This behaviour could range from using explicit words and phrases to sex with other children or adults.
There is no definitive data on the scale of the issue of harmful sexual behaviour by children.
However, a Freedom of Information request revealed that more than 4,200 under-18s were reported as perpetrators of sexual offences in England and Wales in 2013-14.
'Arrested at 15'
The report contains several case studies, including the following:
"I am a 20-year-old man who was arrested at 15 for a serious sexual assault of two girls under eight years old. They lived near me.
"When I was young I was heavily beaten and sexually abused.
"When I was nine months old I was admitted to hospital with broken ribs, a broken arm and a broken leg.
"My sexual abuse lasted nine-and-a-half years and was… horrible to live with for that long – as you can probably imagine."
The inquiry's report said that in some cases, children "make mistakes as they start to understand their sexuality and experiment with it".
It added: "These children are unlikely to pose further risk to the public, given appropriate support, but unnecessarily criminalising or stigmatising them as a 'sex offender' at such a young age makes it more likely that they will struggle to regain a normal life, and increases their propensity to re-offend."
It also said that while public protection should always remain the "primary driver" when dealing with cases, young offenders should be "treated as children first and offenders second".
Mr Khan, who is Barnardo's chief executive, said: "We must remember that many children who show harmful sexual behaviour have experienced or witnessed physical, emotional or sexual abuse as well as neglect and can be extremely vulnerable.
"In some cases a criminal justice response may be necessary, but we have to find a much better way to stop children abusing themselves and each other."
'Understanding and confidence'
Conservative MP Nusrat Ghani, who chaired the inquiry, said: "In this smartphone age, parents must also play a vigilant role in protecting their children from harmful sexual behaviour and from harmful sexual images that cause damage they are too young to understand."
The National Association of Head Teachers (NAHT), which was involved in writing the report, welcomed its findings and called for a "national strategy on harmful sexual behaviour in children".
James Bowen, of the union, said: "High-quality, funded training must be made available to teachers to develop their knowledge, understanding and confidence in teaching pupils about these issues.
"Child protection training for all school staff needs to be developed to include recognising, and dealing with, concerning and harmful sexual behaviours."