Ministers say gifts such as money, food, drugs or alcohol are often used as a means of coercion.
They say robust strategies are needed to ensure children are not sexually exploited by gangs or individuals.
Children's Minister Tim Loughton is launching a plan to make sure agencies work together to tackle the problem.
The Tackling Child Sexual Exploitation Action Plan will bring together the police, the Crown Prosecution Service, local safeguarding children boards and support organisations like Rape Crisis.
The plan will also look at improving sex and relationships education in schools and helping parents know what tell-tale signs to watch out for.
In October, the deputy children's commissioner, Sue Berelowitz, launched a two-year inquiry into the scale and scope of sexual exploitation by gangs.Ms Berelowitz said thousands of children could be affected and the issue reached across race and class.
Launching the action plan on Wednesday, Mr Loughton said: "This country has to wake up to the fact that children are being sexually abused in far greater numbers than was ever imagined.
"It could be going on in every type of community and in every part of the country.
"Too many local areas have failed to uncover the true extent of child sexual exploitation in their communities and failed to properly support victims and their families.
"Child sexual exploitation is child abuse, it is not good enough that some local areas don't recognise it as an issue.
"This is an extremely serious crime and must be treated as such, with the perpetrators pursued more vigorously."Getting to court
Mr Loughton said it must be made easier for young victims and their families to go to court.
"It is worrying that many incidents go unreported because victims are unwilling to come forward," he said.
"The action plan is a big step forward and looks at sexual exploitation from the perspective of the young person, analysing what can go wrong and what should happen at every stage."
The children's charity Barnardo's, which is itself campaigning for a greater understanding of this issue, welcomed the action plan.
Chief executive Anne Marie Carrie said: "We cannot underestimate the scale of this sickening abuse and the damage it is doing to thousands of girls and boys across the UK.
"At Barnardo's we hear so many heartbreaking stories which are every parent's worst nightmare.
"The government's action plan to tackle child sexual exploitation will lay down the gauntlet for the criminal justice system to bring more prosecutions of this type of sex offender - but we need urgent action for the innocents who are groomed and exploited for sex."
Peter Davies, chief executive of the Child Exploitation and Online Protection (Ceop) Centre and Association of Chief Police Officers (Acpo) lead adviser for child protection, said: "A key challenge to overcome is improving confidence of victims, many who are extremely vulnerable, to come forward and report their abuse in the knowledge that they will be fully supported throughout.
"We have already come a long way in bringing this form of child abuse out of the dark, and we remain committed to build upon this work."