Four million fewer children under five are dying each year than in 1990, according to a report issued by Unicef and Save the Children.
The worldwide study, based on research by the Overseas Development Institute and existing UN data, also highlights a number of other improvements in standard of living indicators in recent years.
Between 1999 and 2009, 56 million more children were enrolled in school. Stunted mental and physical development as a result of malnutrition dropped by over a quarter between 1990 and 2008. In addition, 131 countries now have more than 90% immunisation coverage for diphtheria, tetanus and major preventable childhood diseases such as measles, compared to just 63 in 1990.
In the developing world, the percentage of the population living on less than 1.25 US dollars a day fell from 45% to 27% between 1990 and 2005, although it increased in areas such as Central Asia and the Caucasus over the period.
The authors of the report identified six influences on the changes recorded over the last two decades: international aid; commitment and leadership from national governments; social investment and economic growth; well-planned programmes which target the most marginalised groups; and technology and innovation.
Britain is the world's second largest donor of international aid with a government commitment to spend 0.7% of Gross Domestic Product on development by 2013.
David Bull, Unicef's UK executive director, said: "This research is great news for children. But millions are still not being reached and are suffering. We must now redouble our efforts, focus on the most disadvantaged children and defend our overseas aid policy at a time when it is coming under increasing pressure. There is only one chance at childhood and we must not allow the economic crisis and funding shortages to harm children."
Save the Children chief executive Justin Forsyth said: "This report clearly demonstrates the positive impact of well-targeted aid, which aligns with national governments' strategies.
"Millions more children are now surviving beyond their fifth birthday thanks to aid, economic growth and good government policy.
"Where funding gaps exist - for example for primary education or child health - aid can make all the difference."