The UN's Child Rights watchdog said Church officials had imposed a "code of silence" on clerics to prevent them reporting attacks to police and moved abusers from parish to parish in an attempt to cover-up such crimes.
It added the Holy See now needed to hand over an archive of evidence about the abuse of tens of thousands of children and take measures to prevent a repeat of cases such as Ireland's Magdalene laundries scandal, where girls were forced to work in church-run institutions.
The exceptionally blunt report by the UN Committee on the Rights of the Child - the global organisation's most far-reaching critique of the Church hierarchy - followed its public grilling of Vatican officials last month.
The report said: "The committee is gravely concerned the Holy See has not acknowledged the extent of the crimes committed, has not taken the necessary measures to address cases of child sexual abuse and to protect children, and has adopted policies and practices that have led to the continuation of the abuse by and the impunity of the perpetrators."
It called on the Vatican to "immediately remove all known and suspected child sexual abusers from assignment and refer the matter to the relevant law enforcement authorities for investigation and prosecution purposes".
Barbara Blaine, of the Survivors Network of Those Abused by Priests, said: "It's a wake-up call. For the safety of children, we hope every head of state on the planet reads this and acts on it."
Pope Francis has called sexual abuse of children "the shame of the Church" and has vowed to continue procedures put in place by his predecessor Benedict XVI.
The UN said a commission the pontiff created in December should invite outside experts and victims to participate in an investigation of abusers as well as the conduct of the Catholic hierarchy in dealing with them.
It added: "Due to a code of silence imposed on all members of the clergy under penalty of excommunication, cases of child sexual abuse have hardly ever been reported to the law enforcement authorities in the countries where such crimes occurred."
Sections of the report also criticised the Vatican, which said it would study the report, for its opposition to homosexual activity, contraception and abortion.
A Vatican official said these sections on topics the Church feels are non negotiable were outside the committee's remit and were "heavily agenda driven and smacking of acute political correctness".
At a public session last month, the committee pushed Vatican delegates to reveal the scope of the decades-long sexual abuse of minors by Catholic priests.
The Holy See's delegation, answering questions from an international rights panel for the first time since the scandals broke more than two decades ago, denied allegations of a Vatican cover-up and said it had set clear guidelines to protect children from predator priests.
The report called for an internal investigation into the Magdalene laundries in Ireland and similar institutions so those who were responsible could be prosecuted and "full compensation be paid to the victims and their families".