Click here to see a graph of youth crime levels.
However, levels of fear among young people remained high, the report said.
Over half of young people in school are worried about being physically assaulted or being the victim of theft, the report suggests, while a third worry about bullying and racism.
Some 46% of young people in school and 61% of excluded young people say they have been a victim of crime in the last 12 months.
Two-thirds of young people who have been victims of crime say the perpetrator of the offence is another young person aged under 18.
'Encouraging figures'
The Youth Justice Board's annual survey of young people's experience of offending showed reported offending levels by young people in school has remained stable since last year - with 26% of young people in school claiming to have committed at least one offence over the previous 12 months.
It has been broadly stable since the first survey in 1999 when 24% reported offending.
The Lord Chief Justice, Lord Woolf welcomed the drop in young people being put in custody.
He said: "It is particularly encouraging that the policies of the Youth Justice Board are working effectively and beginning to reduce reoffending.
"Turning away young offenders from crime not only produces an immediate reduction in crime, it avoids young offenders becoming adult offenders."
The report comes as a multi-million pound programme of activities designed to keep thousands of young people out of trouble during the school holidays is launched.
Return to the story