The End Child Imprisonment campaign - formed by a group of charities - is proposing a radical rethink of youth sentencing, with the secure estate used only for those who present a risk to others or themselves.
The policy recommendations are listed in a document called: Principles and minimum expectations for children deprived of their liberty, developed by the group, whose members include Article 39 and Just for Kids Law.
Carolyne Willow, director of Article 39, highlighted the Victorian origins of the penal system and urged ministers and opposition politicians to treat the situation as an "urgent matter of child protection".
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Frances Crook, chief executive of the Howard League for Penal Reform, another of the members, described imprisoning children as a "stain on the very fabric of the nation".
"Prisons damage already damaged children," said Crook. "It is time to put children first, and make sure that every single child is nurtured and supported to grow into a law-abiding citizen."
Maggie Atkinson, who was Children's Commissioner for England between 2010 and 2015 and is also part of the campaign, believes a "modern society" should take a more caring approach.
She said: "The incarceration of children and young people is at best unproductive, and at worst qualifies as cruel and inhumane treatment.
"It often scars the children and young people involved still more deeply than whatever has happened to them that made them offend."
It says young offenders should be freed once they are no longer a risk to the public or themselves.
It also suggests that extra custodial terms should never be imposed for children's challenging behaviour while incarcerated.
Any deprivation of liberty must also be reviewed regularly and independently, it adds.
Extra investment in community support for offenders would be required for the overhaul, the campaign states.
Tailored help should include a range of services such as family support, education, health and social care, and accommodation if needed, it says.
High quality education should be provided to those who are imprisoned, who should also have "extensive access" to outside spaces to play and enjoy fresh air.
A policy statement released by the campaign, states: "Decisions must be informed by an understanding of the child's perspective of what their needs are and their current circumstances.
"If a decision is taken to deprive a child of their liberty, written reasons for considering that the relevant thresholds are met, and a full explanation of why assessed risks cannot be accommodated in the community, must be given.
"Children must have the right of appeal against decisions made about them, and must receive advice and specialist representation to ensure this right can be properly exercised."
Earlier this month, Article 39 called for the closure of Feltham Young Offenders Institution (YOI) after 20 members of staff were attacked.
The YOI has been criticised repeatedly over the past 30 years for confining inmates for too long and not offering them purposeful activities or education.
The Ministry of Justice said: "In the last decade, there has been an 86 per cent reduction in the number of children entering the youth justice system for the first time, and youth custody numbers are now 70 per cent lower.
"But the public would expect young people who commit the most serious offences, including murder and gang or organised crime, to face a custodial sentence.
"Those sentences can be an important intervention to help turn children away from a life of crime through education and training."