Children from poorer backgrounds are less likely to make good progress at secondary school than their better-off peers and are often overtaken even if they outperformed them at primary school, the Government's Social Mobility Commission has found.
It described the situation as "one of the great injustices" of the education system and warned that the secondary school drop off means poor children are failing to finish school with the qualifications to succeed in life.
The gap between poor pupils' attainment at the end of primary school and the end of secondary school has widened. Since 2012 pupils from low-income families have made less progress year-on-year than more affluent peers.
Headteachers told the researchers that reduced school funding was already putting pupils' progress at risk and that prospects for improvement were "bleak" despite the Government's new proposed funding formula.
The gap is most pronounced for poor white children, with most low-income ethnic minority groups making progress in line with the national average for all pupils, partly because ethnic minority parents provide more effective home support.
The research, conducted by LKMco and Education Datalab using data from the National Pupil Database, finds that most of the gap (88%) in progress stems from differences in achievement between children at the same school rather than variations between different schools (12%).
Social Mobility Commission chair and Labour former cabinet minister Alan Milburn said: "One of the shocking features of our education system is that the gap between poor pupils and their better-off peers increases during their time in school rather than reducing.
"This new research suggests that the progress they make in primary school is all but wiped out during secondary. The consequence is that successive generations of poor kids are being let down by a school system that is supposed to be there to help them move up and get on.
"This is not just an issue for the Government. If social mobility is to improve, schools need to do more to bridge the education attainment divide between poorer children and their better-off classmates. Closing the gap needs to be top of mind for every teacher in every school.
"The Government can help by setting an explicit target for narrowing the attainment gap at GCSE and by doing more to get the best teachers into the toughest secondary schools."
Part of the problem is the treatment of children on free school meals, who are more likely to be placed in lower sets, have access to less qualified teachers and have lower expectations set for them by schools, the research found.
Children on free school meals achieve almost half a GCSE grade less progress in core subjects than better-off pupils, the report said.
Home life also has a "big impact", with poorer children less likely to benefit from effective homework routines, access to books and computers or cultural and sporting experiences.
Children from low-income backgrounds are also affected by the fact they are more at risk of behaviour issues and exclusion from schools.
Poor pupils in cities do better than those in rural areas, relative to their more affluent peers, and the gap in progress is greatest in large schools with average levels of pupil disadvantage, according to the research.
Pressures on health and social care funding has also left schools facing reductions in support for children with mental health disorders or special educational needs and disabilities (SEND), who make the least progress in secondary school.
Among a raft of recommendations, the commission called on the Government to ensure funding cuts do not exacerbate the problem and to make additional funding available for high quality specialist provision for SEND pupils.
More efforts should be made to recruit good teachers in areas where poorer pupils make less progress and plans to increase selection in a new wave of grammar schools should be stopped, the commission said.
The report called on schools to develop a culture of universally high expectations and exercise "great caution" in setting and streaming practices that can negatively impact poorer pupils.
Schools should also make regular use of data to analyse progress and intervene when performance stagnates or drops off
Resources should be targeted at pupils making the transition from primary school to the same level or beyond those allocated to those working towards GCSEs.
The Government should set up an exclusion fund for specialist provision to reduce the chances of "at risk" children being excluded while school leaders should reduce exclusion rates, particularly for poorer pupils, the report said.