The number of 'fragile states' has soared over the past three years, the World Bank has said, threatening regional and global instability.
Violence in Haiti has made it difficult to build institutions
In a report, the bank warned that such countries would become even more prone to corruption, crime and arms smuggling unless key reforms were made.
Aid projects had not been accompanied by vital reforms while "nation-building on the cheap" did not work, it said.
The 26 fragile countries listed include Afghanistan, Haiti and Angola.
The report, which shows the number of at-risk countries has risen from 17 in 2003, was published in the run-up to the World Bank's annual conference.
The bank has lent $4.1bn (£2.1bn) to so-called fragile nations over the past two years, but it said the positive benefits from its work were "in danger of being diminished".
"Neglecting the fragile states - home to 500 million people, half of whom are living in extreme poverty - risks worsening their misery, in turn feeding regional and global instability," said Vinod Thomas, head of the bank's independent evaluation group.
In the case of the Central African Republic, "inadequate attention" had been given to its budget crisis and in Haiti the aggravated security situation had not been addressed.
Donor countries often failed to consider levels of political instability and the strength of key institutions before committing money, said Soniya Carvalho, the report's author.
"Too often early engagement was not followed-up with a clear and relevant reform agenda," the report said.
To remedy this, the bank recommended that donors cooperate with government ministries and agencies with strong financial controls and transparent practices, or reliable non governmental organisations.
World Bank head Paul Wolfowitz has been a strong proponent of improving governance and tackling corruption as a condition for aid.
In April, Mr Wolfowitz said the bank would reinforce its governance and anti-corruption measures on all bank projects including loans, grants, research and technical assistance.
Proposals by Mr Wolfowitz to tackle corruption have been controversial
But he has come under fire - from places such as Britain - which argue that such an approach is unbalanced.
While supporting its anti-corruption efforts, International Development Secretary Hilary Benn has said the World Bank should not make aid conditional on countries adopting certain economic policies.
Some countries have expressed worries that tackling corruption could slow down the pace at which aid is delivered.
In a bid to encourage better governance, the bank recently said it would give an amnesty to countries that had defrauded the bank in the past, if they admitted their wrongdoing and pledged to follow tough new rules.