Urban gangs are recruiting children aged under nine as they retreat from the streets and adopt more secretive tactics for criminal activities, official research indicates.
Youngsters are being lured from outside schools with the promise of money or new trainers and tracksuits before being deployed around the country to sell drugs, the Home Office study said.
It also raised concerns about exploitation of women, with suggestions that some see group sex as "normal".
Researchers interviewed staff from agencies including police, probation, local authorities and health services in 33 areas around England and Wales.
The findings suggested there was evidence that the use of young people to transport and peddle drugs and the sexual exploitation of women and girls have become more prevalent.
Senior members known as "elders" would buy train tickets for the young drug runners who would be given targets for selling and punished if these were not met, according to the report.
One interviewee said: "The method of recruitment is to target young, easily influenced youths as young as 12 years old from local schools and the surrounding area.
"They [gang members] recruit them with the lure of earning money or being given new trainers, tracksuits etc. [and] then use these runners to deal for them."
In some instances youngsters were away from home or care for several days.
A separate policy paper also published by the Government on Wednesday said there was evidence that children's care homes are being targeted, adding: "We also know of cases where gang members have been waiting outside schools to meet children.
"The gang members take the child away to participate in criminal activities and return them in time to avoid them being reported missing or raising suspicion."
Involvement of children under the age of 11 in gangs was thought to be relatively rare, the research report said.
It added: "Reports of gang members aged nine or younger were almost exclusively from a small number of survey respondents in London."
Staff reported that women and girls were involved "to a great extent" in gang-related criminal activities, including carrying or storing drugs and being used to set up attacks on rival gang members.
A gang associate said: "I know guys that have actually died because girls have set them up."
Girls and women were subjected to sexual or physical violence, with some attacked to exact punishment or revenge on rival gangs, the study said.
One interviewee said: "The worrying thing for me is that you'll get the guys that will be talking about having group sex with vulnerable girls.
"Then you'll have the girls talking about it as well, but both will refer to it as though it was a normal thing."
Gangs were generally seen as "less visible" and are spending less time on the streets, the report said.
It added: "Gangs were thought to be operating more covertly, in part in response to the use of gang injunctions and other enforcement tactics as gangs try to avoid detection."
Home Office minister Karen Bradley announced a new policy to tackle gang-related violence and exploitation, with nine areas receiving targeted support.
She said: "Gang and youth violence has a devastating impact on young people, their families and local communities."