The Youth Sport Trust said it wants to use the power of sport, PE and physical activity to halt the decline in children's physical, mental and social wellbeing.
The charity, which has helped more than 4.7 million children participate in sport and physical activity since 2013, said children and young people's wellbeing is in decline due to a lack of physical activity, low resilience and confidence, and the pressures of social media, exam stress and high youth unemployment.
It said these problems are magnified for young people when they start school, progress to secondary school and enter employment, and are especially an issue for girls, children who are black, Asian, or from another ethnic minority, disabled children, or children from disadvantaged areas.
The strategy includes plans to transform physical education's place in the curriculum, putting it at the centre of wellbeing and achievement in education.
"We will work with teachers, young people, parents and policymakers to maximise PE's potential to improve children's wellbeing and achievement," the strategy states.
It will also work to remove barriers to sport, disseminating best practice to ensure youth sport in the UK is inclusive, accessible and fun.
The strategy also outlines plans to close the gaps created by inequality and disadvantage, particularly at key transitional moments in a young person's life, like starting or changing school and preparing for employment, and empower young people through sport to become local activists, tackling the issues of their generation.
Ali Oliver, chief executive of the Youth Sport Trust, said: "Children are struggling with their mental health while grappling with the pressures of social media. They are seeing shifts in personal relationships, rising levels of exam stress and a decline in empathy and resilience.
"It saddens me that recent research shows today's young Britons have never been unhappier. And while their mental health is declining, one in three children are now classed as obese by the time they leave primary school.
"This crisis of the wellbeing of our children is as heartbreaking as it is alarming and needs to stop now. We want to see a world where every child enjoys the life-changing benefits that come from play and sport."
Neil Davidson, chair of the Youth Sport Trust, said: "The world in which the Youth Sport Trust operates has changed considerably in recent years.
"Schools are facing new challenges and children's lives are being transformed by technology. The alarming trend of recent times has been the continued decline in children's wellbeing.
"Tackling that decline will be at the core of everything we do. Over the next four years we will build on the successes and lessons of this charity's past, and work in even greater depth to ensure the life-changing potential of sport is unlocked where it is needed most, both for today's young people and for generations to come."