At least 10,000 children could be at "terrible risk" because they are effectively off the police radar when they go missing, a major new inquiry has warned.
A parliamentary group called for a two-tier recording system for cases to be abandoned amid concerns it may leave youngsters vulnerable to sexual exploitation or criminal gangs.
Under guidance introduced in 2013, when forces received a report that a child is missing they can class them as either "missing" or "absent".
Cases in the missing category receive an active police response, while children classed as absent are considered to be at "no apparent risk". This normally means a force takes no immediate action but should keep the case under review.
The All Party Parliamentary Group for Runaway and Missing Children and Adults said its inquiry heard of cases of children classed as absent who had been groomed for sexual exploitation or criminal activity such as drug-running.
Labour MP Ann Coffey, who chaired the inquiry, said: "All the evidence shows that the new absent category is dangerous and should be scrapped. It is not fit for purpose.
"It was introduced to save police time but has turned out to be a blunt, crude assessment tool that leaves children who are regularly classed as absent in danger of sexual exploitation and of being groomed by criminal gangs.
"It is scary that exploited young people are falling off the radar and no one knows what is happening to them."
Latest figures show there were 21,339 absent "incidents" involving 9,780 individual children in 2014/15. The group said the true figure was likely to be higher as 29 forces, out of 37 who have implemented the system, provided data.
In one case outlined to the inquiry a 15-year-old girl was categorised as absent after her family reported her missing. They were said to have been told not to waste police time because she was residing with an "older boyfriend".
The girl was reclassified as missing after concerns were raised in relation to child sexual exploitation, trafficking and drugs and she returned home after around four weeks away, according to an account provided to the inquiry.
In another area it was suggested that there had been an increase in the number of missing boys who appeared to have been exploited and the cases "did not originally come to light because the boys had been recorded as absent".
On a national level more children are categorised as missing than absent, but the study said there were very different ratios in individual forces.
Although there may be a number of possible explanations for the variations, written submissions and discussions expressed concerns that the absent category may be seen as a "cost-saving measure" in some areas and that this "could result in significant pressure on call handlers to record a child as 'absent' rather than 'missing'," the report said.
It also found that the longest period of time a child was recorded as absent for was a "staggering" 20 days and 16 hours.
The group said the absent category should be replaced with a new response system assessing the level of risk to all missing children as either low, medium or high.
Matthew Reed, chief executive of The Children's Society, said: "Everything possible needs to be done to make sure any child who goes missing receives an active response and when they are found, that they are listened to."
Chief Constable Mike Veale, National Police Chiefs' Council Lead for Missing Persons, said: "Missing children are a complex area of police work which we take extremely seriously.
"The key to getting our response right is a quick and effective assessment of risk using all the relevant information.
"We are therefore working closely with the College of Policing to identify best practice and I have commissioned a review of all 43 police forces England and Wales.
"Discussions are also taking place with the Home Office and NCA around a national missing person database. It's important to remember that going missing is often a symptom of deeper challenges in a young person's life.
"By the time they disappear, many opportunities to intervene early and address the underlying causes have already been missed.
"This is not a problem the police can solve on their own. We need all agencies - including health and social services - to come together and focus on providing consistent, coordinated and timely support to those in need."
David Tucker, of the College of Policing, said it is "focused on making sure police forces take proportionate steps to deal with the risk around missing people so that vulnerable people are protected".