The T2A Alliance, which comprises 11 organisations including the Barrow Cadbury Trust, Catch 22 and Nacro, argues that a lack of support and structure for 18- to 24-year-olds sows the seeds for "a generation of young people not in education, employment or training who will end up in a life of crime".
The report argues that marginalised young people lack the support given to those who move from home to university.
It calls for a reduction of the number of young adults in custody serving short sentences for non-violent crimes, community sentences for young adults with substance misuse problems and the introduction of a "Criminal Records Bureau Smart" programme for young adult offenders, whereby they should only have to declare previous offences when applying for jobs if the offences are directly relevant.
The alliance also says no under-24s should be sent to adult prisons "where they will effectively be sent to a university of crime".
Rob Allen, director of the T2A Alliance, said: "For too long criminal policy has neglected the special needs of young adults, resulting in high rates of imprisonment and reoffending among this age group. We need a comprehensive rethink of measures for young people in transition to adulthood."