A national protocol published today by the Department for Education, Home Office and Ministry of Justice, outlines ways the prosecution of children in care and care leavers can be avoided "wherever possible and appropriate".
It commits all agencies involved in the care and welfare of looked-after children and care leavers to understand the trauma they may have faced in their lives.
The government says action is needed to tackle the over-representation of children and young people with experience of the care system within the criminal justice system - figures show that looked-after children who have been in care for at least 12 months are five times more likely to offend than all children.
Signatories to the national protocol should recognise that children involved in criminal activity may be the victims of exploitation and crime themselves. This includes being used by gangs in so-called county lines drug distribution networks between urban and rural areas.
Another aim is to reduce the number of police call outs by residential child care providers to incidents. This was highlighted as a concern in Sir Marin Narey's 2016 review of children's residential care.
Being called for in the protocol is "an attitude where all professionals ask themselves ‘would such behaviour lead to an arrest if the child had been living with their family?'"
The protocol also aims to ensure that children and young people's views are taken into account after an incident where police are involved. Their views should then be used help shape local policies in helping to prevent prosecutions.
Those signing up to the protocol would also commit to adopting restorative justice approaches.
Research by the Howard League for Penal Reform last year revealed that joint action by care home providers and police was already successfully reducing the number of call outs.
In Dorset, call outs from homes had almost halved between January and August 2017, compared with the same period the previous year. Action in the county includes restorative justice training for care home staff to better deal with challenging behaviour. Police in the county have also been given training to advise children's home staff on whether a call is necessary.
The government's protocol cites Dorset's plan of action when responding to incidents as an example of good practice.
In launching the protocol children's minister Nadhim Zahawi said: "Whilst the vast majority of looked-after children do not get into trouble, for a small number, contact with the criminal justice system can make it that bit harder to achieve positive outcomes.
"Whilst never taking away from the need to take responsibility for actions and their consequences, the right approach in responding to challenging behaviour or during contact with criminal justice agencies can help avoid unnecessarily criminalising looked-after children and care leavers, and promote better outcomes for them and society."
Independent Children's Home Association (ICHA) chief executive Jonathan Stanley added: "For many years providers have been the driving force for the development of decriminalisation. The results are now being seen.
"The protocol is a welcome catching up with provider practice now extending out to include other agencies. ICHA are pleased to be supporting the national implementation of the protocol so all children, providers and agencies everywhere know what to expect and do. All agencies everywhere will be working to an agreed national consensus and commitment.
"ICHA are further supporting the national implementation with a legal advice document regarding data sharing safeguards for looked-after children that will act as a national reference point for all agencies."