Latest evidence into the effectiveness of the Children and Young People's Improving Access to Psychological Therapies programme (CYP IAPT) found just one in three children reported a recovery at the end of treatment.
Only half said they had improved, and one in 10 reported their mental health issues had worsened.
The Child Outcomes Research Consortium (CORC) study into 8,000 CYP IAPT cases, from 2011 to 2015, also gathered evidence from parents, who were even more scathing about its success rate, saying that in just one in five cases their children had recovered.
Just 40 per cent of parents reported improvement in their child's condition, and one in 10 also said there was a deterioration.
The government allocated £32m to launch CYP IAPT in 2011, with an extra £22m made available the next year with a specific focus on improving access to therapy for those with eating disorders, depression, self-harm and conduct issues related to attention deficit hyperactivity disorder (ADHD).
A further £118m allocation for the programme was made last year to expand it further across England by 2018/19.
Report lead Miranda Wolpert hoped the report "marks a turning point for our understanding of what is realistic to expect in terms of outcomes" from such specialist mental health support.
She says such support needs to focus more on how it helps children and young people to "manage ongoing difficulties when recovery simply isn't on the cards".
This would require a shift in focus of resources towards greater support in schools and within the community to "foster resilience and wellbeing", she added.
Commenting on the report findings Sarah Brennan, chief executive of the charity YoungMinds, said that while CYP IAPT had been an important addition to the range of help available to children with mental health issues "it isn't realistic to expect short term help to solve all the problems of young people whose mental health has deteriorated to the extent of being diagnosed".
She added: "Recovery from mental illness can take a long time, and is rarely just about treatment. There is good evidence that building resilience - including a sense of belonging, hope and self-belief - is crucial.
"Young people are different and need a variety of options that can form the wider support they need. For instance, being part of a peer support group, a youth counselling community service, a football team or an organisation like the Girlguides may have a massive impact on their self-worth.
"It is also essential that young people learn how to look after themselves, and know where to find help if they become ill again."
However, Sue Bailey, chair of the Children and Young People's Mental Health Coalition, said it is "unfair" to label the programme as unsuccessful based on the study findings alone.
"We have no robust outcome data to compare this to, so we have to see it as an honest start to transforming services," she said.
"The data in this report starkly highlights the complexity of treating mental health issues, and size of the challenge to transform the children and young people's mental health system services."
CORC added that further research is required as these latest findings were hindered by a degree of missing data and differences in the way information about cases was recorded.
A Department of Health spokesperson said: "Comparing the data in this way is misleading. Recovery rates are typically lower for under-18s because it is a service that also sees patients who may be more acutely unwell. However, we know that talking therapies can be beneficial for a wide range of conditions which is why we are committed to expanding access for young people."