The government is being urged to raise the age of criminal responsibility in England and Wales from 10 to 14.
The report says the youth justice system should be reformed
A report for the Centre for Crime and Justice Studies says too many children are prosecuted and criminalised.
It calls for greater emphasis on the educational, social and mental health needs and suggests care proceedings should be used for younger offenders.
The Home Office said courts currently can intervene earlier to stop offending and it had no plans to raise the age.
The report's author, Rob Allen, says the youth justice system should move away from "cops, courts and corrections".
The report recommends a new sentencing framework, including a residential training order of up to two years - or five years in the case of grave crimes.
It calls for the phasing out of prison custody for 15 and 16-year-olds and new facilities for 17-year-olds.
Mr Allen, who spent eight years on the Youth Justice Board, said: "We have seen an increasing preoccupation with protecting the public from young people and a growing intolerance of teenage misbehaviour of all kinds."
He told BBC Radio Five Live that young offenders he dealt with came from disturbed backgrounds and had often not been to school.
"I don't think they have reached the point of development that you could safely say they do know right from wrong," he said.
"They may not be able to know about the consequences of what they do."
The report highlights that the age of criminal responsibility is higher in many other countries - in France it is 13, in Japan it is 14 and in Italy it is 15.
Mr Allen said: "You run the risk of labelling them as criminals. They begin to see themselves as delinquents, others treat them as delinquents, and very quickly you are in a cycle that youngsters find it very difficult to break out of."
In 1997, the government lowered the age children were presumed to know the difference between right and wrong from 14 to 10.
OFFENDERS UNDER 14
Jon Venables and Robert Thomson, both 10, convicted of 1993 murder of two-year-old James Bulger
Mary Bell, 11, found guilty in 1968 of the manslaughter of two small boys
Brothers Danny, 12, and Rickie Preddie, 13 when they killed Damilola Taylor in 2000
According to the Centre for Crime and Justice Studies, this has resulted in an increasing proportion of young people being prosecuted.
But the Home Office said: "The current age of criminal responsibility allows us to intervene earlier to prevent offending and to help young people develop a sense of personal responsibility for their misbehaviour."
Shadow home affairs minister Edward Garnier said: "We will study this report carefully but remain to be convinced about the need to raise the criminal age of responsibility."
However, the Children's Society said it was "absolutely essential" the age of criminality was raised back to 14.
Chief executive Bob Reitemeier said: "It is staggering that children as young as 10 can be placed in custody for their actions yet must wait until 18 to be considered mature enough to vote."
He said the number of children in prison in England and Wales "sky rocketed" by 19% since January and there should be attention on prevention and alternatives to custody.