In addition to keeping a youth justice division separate from the National Offender Management Service (Noms), the committee said a planned advisory board should be "genuinely and visibly independent".
The new unit should also improve the dissemination of best practice and exercise "light touch" oversight of youth offending teams.
The report comes as proposals to scrap the YJB are due to be discussed again in the House of Lords as part of the Public Bodies Bill.
The last time the bill was discussed by Lords they voted through an amendment to save the YJB, a move that was later reversed when it went back to the Commons.
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