More than 600 children and young people have been treated for Type 2 diabetes, prompting concern about the "time bomb" of childhood obesity.
The Local Government Association (LGA), which represents more than 370 councils in England and Wales, said town halls must be given more funding urgently to tackle the "hugely disturbing trend" as it highlighted figures showing children as young as five have been treated for the condition.
Type 2 diabetes, which is most common in adults, occurs when the body does not produce enough insulin to regulate its blood sugar levels and can be linked to lifestyle factors such as obesity.
Some 621 children and young people under 25 received care for Type 2 diabetes in paediatric diabetic units in England and Wales in 2015/16, of which 78.5% were also obese.
That compares to 545 people in 2014/15, according to an audit by the Royal College of Paediatrics and Child Health (RCPCH).
Fifteen children with the condition were aged between five and nine last year.
It is believed that the true total could be higher as the RCPCH audit only covered those being treated in hospital units rather than by their GP.
Councillor Izzi Seccombe, chairman of the LGA's Community Wellbeing Board, said: "These figures show a hugely disturbing trend in the increasing number of children and teenagers being treated in Paediatric Diabetes Units for Type 2 diabetes, a condition normally only associated with adults.
"Obesity is usually linked with major health conditions later on in life, but already we are seeing the devastating consequences at an early age.
"Ahead of the first anniversary of the childhood obesity plan, this highlights the need to take urgent action on this major public health time bomb."
The LGA warned that cuts to council public health grants were impacting on their ability to fight childhood obesity.
Council leaders also said more needed to be done to help black and minority ethnic groups, which have a disproportionately higher number of children and young people with Type 2 diabetes.
Libby Dowling, senior clinical advisor for the charity Diabetes UK, said: "It is extremely worrying that more young people are diagnosed with Type 2 diabetes, especially as we know that for nearly 80% obesity is the likely cause for developing the condition.
"Type 2 diabetes can lead to devastating complications in adults, like heart disease, kidney failure and blindness and it seems to be even more aggressive in children, who develop high blood pressure and high cholesterol even quicker.
"Not only that, but the diagnosis can have a big impact on a child's psychological health.
"Some of the risk factors for Type 2 diabetes are out of our control, but we can do something about being overweight or obese which is one of the most significant risk factors.
"It's shocking that children are having to struggle with a condition that could have been prevented."
The Department of Health said it had a "clear and comprehensive" commitment to tackling childhood obesity.
"To halt this trend in future, we are delivering what public health experts call the world's most ambitious plans on childhood obesity and diabetes prevention," a spokesman said.
"We have introduced a soft drinks industry levy as well as an extensive sugar reformulation programme - these are already delivering results: in the past year Nestle, Lucozade Ribena Suntory, Tesco, Waitrose, Kellogg's and Sainsbury's have all committed to cutting sugar in their products."