One in four children held in young offenders' institutions have been in care, inspectors have revealed.
Nick Hardwick, chief inspector of prisons, said the fact that around 400 children who have been in care are in custody at any one time was "a cause for real concern".
He also said little progress has been made to close the "substantive gaps in the planning and care of looked-after children in custody" over the past five years.
Many young people are being released with inadequate support, some without even an address to go to, and three of the 10 young people released and interviewed by inspectors were back in custody within a month, the report found.
Within three months, seven of the 10 children had been convicted of further offences, with four returning to prison.
While the involvement of local authorities often depended on the commitment of individual social workers, a third of custody safeguarding teams "felt that some social workers tried to end their involvement while the young person was in custody".
The report, which polled young people and staff at seven institutions between May and October last year, found adequate and early planning for release was a key concern.
"Accommodation was often not confirmed until close to the young person's release or, occasionally, even the day of release," Mr Hardwick said.
Penelope Gibbs, director of the Prison Reform Trust's Out of Trouble programme, said the report showed the system "simply is not working".
A Ministry of Justice spokesman said: "The Government recognises that young people in custody are some of the most vulnerable young people in society and that effective resettlement and support is essential to breaking the cycle of offending."