JK Rowling has called for an alternative to orphanages, saying children "all over the world are being severely harmed".
The Harry Potter author, 52, said even well-run institutions have a detrimental impact on health and development.
Rowling, who founded international children's organisation Lumos, told a conference: "Children all over the world are being severely harmed, physically and psychologically, because their primary right to a family has been taken away.
"Even those orphanages that are well-run, have good material conditions and qualified staff can't replace the individual love, support and stability children get from a family."
She told the No Child Left Behind conference: "Donors across the world, many with the best of intentions, continue to fund orphanages that result in lifelong physical and psychological damage to children.
"We need to stop money going to institutions and redirect it towards alternatives that strengthen families and communities - creating a long-term, sustainable system of care."
Rowling and Neven Mimica, the European commissioner for international co-operation and development, called for international collaboration to address the issue, saying children are suffering abuse, harm and neglect in orphanages and institutions around the world.
Lumos chief executive Georgette Mulheir said: "Children are being traded, mistreated, sexually abused and, in the worst cases, killed for profit as part of the global orphanage industry.
"We must work together urgently to move away from systems that expose children to all forms of abuse and neglect in the name of care and protection."
She added that "protecting unaccompanied refugee children" is "a particular challenge" as the "world currently faces the greatest refugee crisis since the Second World War".
"We must all work together to end the detention in institutions of refugee children and ensure all children can flourish in families."
Australian Associated Press
