The number of children being put forward for adoption has nearly halved , figures show.
In the three months to September last year there were 1,830 initial decisions by local authorities in England that a child should be adopted, compared with 960 for the three months to June this year - a fall of 47%, according to the Adoption Leadership Board (ALB).
The body, established by the Government as part of a shake-up of the system, said that applications for court orders allowing a child to be placed for adoption plunged by 34%.
There was also a fall of 54% in the number of placement orders granted by courts from 1,650 to 750.
In recent years adoption levels had risen to record levels after an increase of 63%, the ALB said.
But the sharp fall observed recently prompted ALB chairman Sir Martin Narey to issue "myth-buster" guidance to clarify the meaning of recent court judgments.
He said: "After two years of significant progress in finding more adoptive homes for the thousands of children waiting - transforming their lives along the way - we have seen a sudden and significant fall-off in the number of children being put forward for adoption.
"It is clear from my discussions with social workers and managers in local authorities and in voluntary adoption agencies that there is a belief that the law has been fundamentally changed by a number of court judgments.
"So I am pleased to produce this simple myth-busting guide - drafted by a senior Queen's Counsel - to what those judgments do and do not say.
"I am extremely grateful to Sir James Munby, president of the Family Division, for his advice. He has seen the document and is supportive of its aim of dispelling the myths that have arisen."
Messages included in his guidance are that t he legal test for adoption has not changed, and c ourts must be provided with expert, high quality, evidence-based analysis of all realistic options for a child and the arguments for and against each of these.
The guidance said: "Where such analysis has been carried out and the local authority is satisfied that adoption is the option required in order to meet the best interests of the child, it should be confident in presenting the case to court with a care plan for adoption."
Sir Martin said: "The board and I have published this guide to help everyone working for children understand the law around these complex cases, and be confident in making the right decisions for the child.
"Where the right analysis has been carried out and a child's social worker is satisfied that adoption is the option needed to meet the best interests of the child, the local authority can be confident in presenting the court with a care plan for adoption.
"Adoption is not right for every child but where it is, we owe it to them to pursue this option relentlessly. Our most vulnerable children deserve nothing less".
Children and families minister Edward Timpson said the last year had seen the number of adoptions reach a record high.
He added: "This means thousands more of our most vulnerable children are finding the loving and permanent homes they need.
"However, we've also seen a decrease in the number of children placed for adoption, because of a misinterpretation of the law following a number of significant judgments by the courts.
"The new guidance published today by the Adoption Leadership Board will help make clear the law around the correct interpretation of these complex cases and ensure the right decisions are being made each and every time."