More victims will suffer crime unless the regime for dealing with young adult criminals is overhauled, a Commons report has warned.
MPs attacked the Ministry of Justice (MoJ) and National Offender Management Service (NOMS) for a "lack of action" and "tinkering around the edges".
They said chances to cut crime would be missed if the approach to offenders aged between 18 and 25 continues to fail.
There is "overwhelming evidence" that the criminal justice system does not adequately address the distinct needs of young adults, the Commons Justice Committee concluded.
Its report argued that those in the age group offend the most but have the most potential to stop offending.
"The Ministry of Justice has not clearly articulated to us why it has not acted decisively to develop a systematic new approach to young adults, given the weight of evidence," the study said.
"The lack of action denotes an absence of leadership, both departmentally and within NOMS, and tinkering around the edges misses clear opportunities to seek to prevent the cycle of offending continuing, creating more victims in the process."
The number of young adults in the criminal justice system, who are mostly men, has fallen in recent years - but figures suggest 18- to 25-year-olds account for 30% to 40% of the criminal caseload.
They also have the highest reconviction rate, with 75% returning to crime within two years of being released, according to statistics cited in the report.
The committee argued that there is a strong case for a distinct approach to the treatment of young adults in the criminal justice system, saying that dealing effectively with them while the brain is still developing is crucial in making a successful transition to a crime-free adulthood.
Conservative MP Bob Neill, chairman of the committee, said: "The approach to young adults in the criminal justice system must be based on a robust assessment of the evidence.
"If not, it will continue to fail, with so many missed opportunities to transform lives, repair harm, lower costs, and reduce crime."
He said research findings in criminology, psychology and neurology indicate the need for a distinctive approach.
"There is overwhelming enthusiasm for change within the sector," Mr Neill said. "And yet the Government has been hesitant to act. We do not understand why it has not been more courageous, and has hidden behind outdated legislation."
The committee has drawn up a "blueprint for change", calling for legislation to extend up to the age of 25 the sentence of detention in a young offender institution for 18- to 20-year-olds.
Highlighting current conditions in the custodial estate, the report said the MoJ and NOMS should either act urgently to recruit and retain more prison officers, or the Government should seek to adjust the sentencing framework to reduce the population to "manageable levels" by shifting to "alternative community-based means effectively to promote public safety".
Other proposed steps included testing of "young adult" courts; implementing a distinct approach, with specialist staff dealing with young adults; and carrying out further work to evaluate the impact of maturity as a mitigating factor in sentencing.
Alex Hewson, of the Prison Reform Trust, said: "A justice system which throws young people off a cliff edge on their 18th birthday, and expects them to fend for themselves in the adult system when they are still maturing and often vulnerable, is not one that is set up to deliver for offenders, victims or local communities.
"This report from the cross-party justice committee offers a clear endorsement of the importance of taking account of maturity at all stages of the criminal justice system and a comprehensive blueprint for reform."
A Ministry of Justice spokeswoman said: "Significant efforts have been made to divert young people from custody and this has resulted in a welcome reduction in the prison population - down 40% since 2010. But those in custody are in for longer and for more serious offences.
"We recognise the specific challenges associated with this age group and are committed to addressing these.
"This work will form part of our wider reforms to make prisons places of safety and reform and we will be publishing a White Paper shortly setting out our plans."