The College of Policing advises officers to respond "in a proportionate way" to children sharing indecent imagery of themselves or their peers.
Police should consider the long-term impact of investigation - such as labelling a child a "sex offender", the advice says.
The NSPCC welcomed the change.
National Police Chief's Council lead for child protection Chief Constable Simon Bailey, said: "If this behaviour can be dealt with in other - more appropriate - ways then it should be."
Typically in England and Wales, producing and distributing sexual images of anybody under 18 is a criminal offence, even if two under-18s are sexting one another.
The new guidelines state that most offences involving sexual activity with children will require a "full criminal investigative response" - for example, in the presence of exploitation, coercion, a profit motive or adults as perpetrators.
But it says: "Offences involving self-generated images or images obtained with consent by other children may be dealt with differently.
"Forces may, for example, consider that suitably experienced first responders, safer school officers or neighbourhood teams can provide an appropriate response, thereby avoiding stigmatising children or causing them unnecessary fears and concerns."
Forces should consider the long-term impact of investigation and prosecution - such as labelling a child a "sex offender" - in deciding whether criminal justice processes are necessary, the advice says.
Ben was 15 when he and his girlfriend engaged in a sexually explicit online chat.
He says: "Because you're behind a screen you develop a sense of confidence in which you can say pretty much anything."
Later, she asked him to send her a naked photo. Ben says he felt uncomfortable and refused - but had he done so he would have been breaking the law.
In another reported episode a 14-year-old boy was added to a police database after he sent a naked image of himself to a female classmate on picture messaging app Snapchat.
Mr Bailey said: "More children than ever before are taking explicit images of themselves and this briefing note is a valuable resource for officers when dealing with these sensitive cases.
"It highlights the need for forces to consider the long-term impact of investigation and prosecution on young people.
"We will take all cases seriously with criminal investigations into those involving any form of exploitation. But it will always be a common-sense approach that doesn't criminalise children unnecessarily."
He said sexting was not just "harmless teenage behaviour".
"There are significant risks involved for children and young people; once image is sent, control is lost, and it can cause significant distress when it gets into wider hands," he said.
A spokesman for the NSPCC said children should not be criminalised, but should be educated about the dangers.
"Children need to know that creating and sharing these images can put them at risk of being targeted by predatory adults," he said.

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Diana Taurasi and Lindsay Whalen scored 17 points apiece for USA, gold medallists for the eighth time in 10 appearances.
Victory extended USA's Olympic winning streak to 49, dating back to the bronze-medal match at Barcelona 1992.
Spain's silver was their first Olympic medal of any colour in women's basketball.
The world's third-ranked team had lost 103-63 to the United States in the group stage.
Spain's Alba Torrens scored a game-high 18 points, but USA were comfortable winners, leaving coach Geno Auriemma in tears.
Victory brought a fourth consecutive Olympic gold for Taurasi, captain Sue Bird, and Tamika Catchings.
Earlier, Serbia won bronze by beating France 70-63.
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Sexting cases involving children should not always be handled with a full-scale criminal investigation, new police advice says.
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USA won their sixth successive Olympic women's basketball title, beating Spain 101-72 at Carioca Arena.