The government has pledged to eradicate child poverty by 2020
Poverty has been rising in the UK since 2004 and is now at the same level as the start of the decade, a report by the Joseph Rowntree Foundation says.
The group said that issues of unemployment and the repossession of homes had become more acute before the recession started.
It said long-term solutions were needed to reverse the poverty trend.
But the report also pointed to improvements over the last decade, such as a decreasing fear of crime.
It added that 11 to 16-year-olds were getting better basic school results, and there were fewer youngsters thrown out of school.
The rate of premature deaths is falling and infant mortality has also dropped over the past 10 years.
The report - which is the Foundation's annual assessment of poverty in the UK - said that 2004-05 was a key turning point as that was when poverty, unemployment and property repossessions all started to rise.
"The report highlights the scale of the challenge the government faces if it is to reduce poverty significantly in the UK," said Julia Unwin, chief executive of the Foundation.
"Although there was success in reversing long-term adverse trends in the first half of the last decade, the re-emergence of these problems indicates that poverty cannot be solved with short-term, reactive solutions."
The report, produced by the New Policy Institute, found that two million children lived in low-income, working households. This was the highest figure since the Foundation started collecting records.
Peter Kenway, co-author of the report, said that the tax credits system was tackling the symptoms, not the root cause, of the issue that many people were not getting enough income despite doing many hours of work each week.
He said that the solutions were "not obvious" but required a debate over subjects that some politicians considered taboo.
They included the fact that some people had been "taxed into poverty", as well as the effect of more women in the workforce and the impact of migration levels into the UK.
The government has repeated its commitment to eradicating child poverty by 2020.
"We are committed to fighting poverty and action we have taken has seen persistent poverty fall to its lowest ever level," said a spokeswoman for the Department for Work and Pensions.
"We know that work is the best route out of poverty and that is why we have invested £5bn since last November in creating jobs, bringing in front line advisers to Jobcentre Plus and expanding training and apprenticeships."
But shadow work and pensions secretary Theresa May said: "This report blows apart Labour's hollow claim to be the party of poverty.
"Gordon Brown spent far too much time during the good times boasting that he had ended boom and bust instead of actually getting on with the job of tackling the deep-rooted social problems plaguing Britain."