Up to 3,000 vulnerable children in care are being failed by a system that has seen sex attackers placed with abuse victims and one teenager moved 31 times, inspectors have said.
Children in care who are placed outside their home area and supervised by youth offending teams (YOTs) face "extremely poor" futures, found Her Majesty's Inspectorate of Probation (HMIP).
Basic checks are not being made by children's services when placing these "vulnerable and potentially dangerous" children into homes, warned HMIP.
The inspectorate, along with education watchdogs Ofsted and Estyn, looked at 60 children in six regions in a joint inspection into the work of YOTs with children placed away from home.
Chief inspector of probation Liz Calderbank said she was shocked by the "distressing" findings, saying that "shipping" children over 50 miles away makes offending "inevitable" in some cases. She said: "The system is failing in terms of how it is trying to look after them."
In one example, a 16-year-old boy was moved 31 times since coming into care at the age of three, including one placement which lasted less than 24 hours. Around a third of children were placed more than 100 miles away from home and nearly two-thirds were placed 50 miles away, HMIP found.
Regulations require local authorities to allow the child to live near their home, as far as reasonably practicable, the report said. But data from the Department for Education shows 10 local authorities, including Hackney, have no children's homes in their area.
Juliet Lyon, director of the Prison Reform Trust, said: "Let down by families and local authorities alike, with a trail of failed placements and further and further from home, far too many children find themselves on the dreary, damaging route from care to custody. Too often, the state proves to be a poor parent as the tiny minority of children in care become the substantial number behind bars."
A Department for Education spokesman said three expert groups are developing proposals to improve the care provided by children's homes. He said: "It is completely unacceptable that some local authorities and homes are letting down children by failing to act as a proper 'parent'.
"Children placed far from their homes are extremely vulnerable. It is essential that local authorities responsible for them provide the vital support they need to keep them safe and well and to encourage their potential. Where children are offenders, this will include working with Youth Offending services to prevent any re-offending."