The report, Counting Lives: Responding to Children that are Criminally Exploited, finds that while teenagers are most at risk of exploitation, targeting of children of primary school age is increasing.
Examples include a youth worker reporting that an eight-year-old was earning money from drugs for his mother, and in another case a seven-year-old was receiving support from local services.
Many police forces and councils are not recording data about children who are exploited and nearly two-thirds of councils do not have a strategy in place for tackling child criminal exploitation, according to the research.
Some professionals cited a lack of understanding of the National Referral Mechanism, describing it as a "form-filling exercise" rather than a gateway to support, the report finds.
The charity is calling for independent advocates to help children who are referred, to get the support they need.
It also wants to see children treated as victims rather than criminals, child criminal exploitation to be defined in law and for more funding for early help.
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The Children's Commissioner for England estimates there are at least 46,000 children involved in gang activity.
Although boys are believed to be most at risk, one in six children referreed as suspected victims are girls.
Family breakdown, living in poverty and being excluded from school make children vulnerable, but the charity found that simply loneliness and wanting to fit in are also risk factors - meaning that affluence is not a bar to exploitation.
A Manchester primary school deputy head described the issue as a "growing concern", adding: "There are a couple of children we know of who are ten and younger who have been caught up in this.
"One boy in Year 6 is often picked up after school by older boys from the area who are about 13 or 14 but we know they are also involved with boys aged about 16 or 17, so you can see there is a web of exploitation where children who are exploited are then made to involve the younger ones.
"I once saw one of the ten-year-olds taking free fruit from the local supermarket and giving it to the older boys outside.
"This was a test of loyalty and an exercise in seeing what the boy was prepared to do for them - that's how it starts.
"They're easy targets as they're seen as sweet and small and because of this they don't get caught or end up in as much trouble as older children."
Practitioners also reported children deliberately getting sent home from school or excluded to avoid missing their shifts working for criminals.
Nick Roseveare, the charity's chief executive, said: "This shocking report reveals how cowardly criminals are stooping to new lows in grooming young people to do their dirty work and in casting their net wider to reel in younger children.
"Children are being cynically exploited with the promise of money, drugs, status and affection and controlled using threats, violence and sexual abuse, leaving them traumatised and living in fear.
"Yet the response from statutory agencies is too often haphazard and comes too late and a national strategy is needed to help improve responses to child criminal exploitation.
"This should mean better early help for children and training for professionals, access to an advocate to ensure all children are supported as victims, and a greater focus on disrupting and bringing to justice the perpetrators who are exploiting them."