More than 400 children have been identified as victims of abuse over the past year by the UK's national centre for child protection.
The Child Exploitation and Online Protection centre (Ceop) said the children had been safeguarded or protected as a result.
And it said more than 500 people had been arrested for child sex offences.
But the "great tragedy" is that much child abuse goes unreported, said its chief executive Peter Davies.
Ceop was set up in 2006 to track online paedophiles and bring them to court.
In its annual report, the centre said 414 children were helped, 513 people arrested and 132 offender networks broken up in the UK in the past year. This is a record number of children and a record number of arrests for the centre.
Over a five-year period the agency said it helped to dismantle more than 394 high-risk sex offender networks and arrest 1,644 suspected paedophiles.
'Suffering in silence'
According to the report, images on the internet appear to show that younger children are increasingly becoming victims of abuse.
Mr Davies told the BBC: "The great tragedy and the great challenge for us is that so much child abuse goes unreported.
"One of the unique things we do is use the internet to identify people who pose a risk to children and identify children who are at risk who otherwise would have just carried on suffering in silence.
"There is far more child abuse going on out there than ever gets reported. It's a major concern, it's something everyone needs to pull together and do something about."
He added: "Our contribution to that is to highlight it and do what we can using our technical expertise and our partnerships to stamp out the offending.
"And make sure that children and young people, and their parents and whoever cares for them, have the best possible advice and guidance so that they can empower themselves."
Mr Davies said Ceop was trying to stay ahead of developments in technology, including in the area of social networking sites.
Jon Taylor, an internet safety expert and former police officer who went undercover posing as a 12-year-old girl, said it was relatively easy to pose online - either as a child who may be groomed or as a sexual predator - to "mingle" and find out what people were doing.
But he said it was difficult because the internet is not "proactively policed", and instead reacts to intelligence and information.
"The big problem arises from the fact that we are dealing with what we call a non-statistical crime because you have to understand that the police do police through statistics.
"If it's reported it'll get a reaction, and that's one of the biggest problems with child abuse, especially online child abuse, that it doesn't really get reported," he said.
He said it was also important for people to understand the "whole picture" of how children use the internet, including chat rooms and webcam chats.
"There are all these different areas that sexual and child predators will use for their own benefit," he said.
Ceop is currently affiliated to the Serious Organised Crime Agency (Soca), but is to be merged with the new National Crime Agency when it is formed in 2013.
The move prompted the resignation of Ceop's former head Jim Gamble over concerns that the changes were motivated by a desire to cut the number of quangos rather than improve child protection.
Mr Davies insisted that, as well as retaining its own budget, the unit would also keep "its own brand, its own approach and its own dedication to putting the safety and well-being of children first".
He said the agency was "bringing this crime more into the open and are working collectively with many others to break down the taboos and obstacles that stop children getting the help and support they need".
A spokeswoman for child protection charity NSPCC said: "This impressive work by Ceop underscores the constant and serious threat to vulnerable children.
"Latest figures from our helpline show a record number of children had to be given immediate protection because they are at risk of harm.
"But the good news is more people are no longer standing idly by but are reporting these cases."