Developing countries must invest in young people, promoting education and health and developing essential skills, a major World Bank report says.
Access to education is a priority need, especially for girls
The World Development Report says there are now a record 1.3 billion people aged 12-24 living around the world.
Those numbers could create problems in many nations if societies do not adapt, World Bank officials warn.
Although the number of young in primary education is rising, the report says some 130 million cannot read or write.
Young people are thought to make up about half the world's unemployed, the report says.
It also estimates that about 100 million new jobs need to be created in the Middle East and across North Africa before 2020 to cope with the numbers of young people seeking work.
'Window of opportunity'
The report analyses the development of young people in terms of five key "transitions".
Managing those transitions - learning, working, growing up healthy, forming families and exercising citizenship - will require continued investment by governments and the creation of an environment for young people and their families to flourish, World Bank President Paul Wolfowitz writes in the report.
The bank's chief economist, Francois Bourguignon, attending the annual meeting of the International Monetary Fund (IMF) and the World Bank, in Singapore, said governments around the world had a "demographic window of opportunity".
"It is far easier to develop skills during youth," Mr Bourguignon said.
"If we fail to do that, it will be impossible to remedy the missed opportunity. It is fundamental to invest in youth."
According to figures in the report, the "demographic window" varies from country to country: in industrialised states such as Japan and Italy it closed about 10 years ago.
China has just a few years of its window still remaining, the bank estimates, but India, with a younger population, still has 30 years.
The report identifies failings in vital areas such as education and the development of key skills.
While most children in Indonesia attend school for six years, with 80% completing primary education, the numbers in secondary education are considerably smaller.
Young people in India have growing opportunities for work
In many parts of Africa initial enrolment rates are lower, and access to education for girls is more of a problem.
Poor education and a lack of skills were cited by employers in countries as far apart as Algeria, Brazil, Bangladesh, Brazil, China, Estonia and Zambia, the report says.
Health issues are also a major concern, with HIV/Aids and the spread of other sexually-transmitted diseased cited as a key problem.
Governments should plan ahead in order to offer the young the best opportunities to develop their capabilities and family life, the report says.
Those whose take bad decisions or bad luck should be offered second chances, it adds, as a denial of opportunities can have long-term implications.