The report, entitled "Children: The Missing Face of AIDS," said the antibiotic cotrimoxazole provides "highly effective protection" against diseases like pneumonia and postpone the need for anti-retroviral drugs.
"In some settings, it has been shown to reduce mortality in children living with HIV/AIDS by more than 40 percent," the report said.
UNAIDS said that at the price of $0.03 per day, cotrimoxazole is a "low-cost intervention that could make a real difference to children living with HIV/AIDS."
The agency estimated that every day, 1,800 more children under 15 years of age are infected with HIV. Most of them acquire the virus from their mothers while still in the womb.
Around 1,400 children in this age group die of AIDS-related diseases every day. Sub-Saharan Africa accounts for 85 percent of all infected children below 15 years old.
However, UNAIDS said children in South and East Asia are the "largest group of children living with AIDS and dying from the disease outside of sub-Saharan Africa."
UNAIDS noted that the course of the disease is particularly "aggressive" in children and called on government to include cotrimoxazole in their basic health services for people living with HIV/AIDS.
"Without treatment, care and support, HIV multiplies and destroys the defenses to infection, leaving the child less able to resist pneumonia and other opportunistic infections," UNAIDS said.