The council wants to provide a safer online environment for children
A new internet watchdog has been launched to help protect children from "harmful" web content, such as cyber-bullying and violent video games.
The UK Council for Child Internet Safety (UKCCIS) brings together social networking sites and technology firms.
It aims to teach children about web dangers, target harmful net content and establish a code of conduct for sites featuring material uploaded by users.
Gordon Brown said the move was a "landmark" in child protection.
The prime minister said the growing importance of the internet in young people's lives meant the task for government and society was to strike a balance between safety and freedoms on the web.
"The challenge for us is to make sure young people can use the internet safely and do so with the minimum of restrictions but the maximum of opportunities," he said.
He went on to say the internet offered "a world of entertainment, of opportunity and knowledge" to children.
"But just as we would not allow them to go out unsupervised in playgrounds or in youth clubs or in swimming pools, so we must put in place the measures we need to keep our children safe online," he said.
Mr Brown added that the responsibility for protecting children from online danger lay with the whole of society.
Home Secretary Jacqui Smith, also at the launch, said: "We are determined to do all we can to ensure that the internet environment is safe for children to use."
The council, which will report to the prime minister, will have a membership of more than 100 organisations, including technology companies such as Microsoft and Google, websites such as Facebook and mobile phone companies such as O2.
They will work together to create a child internet safety strategy to be published next year.
The strategy will:
- Establish a public awareness safety campaign
- Establish measures to protect children and young people, such as taking down illegal internet sites
- Promote responsible advertising to children online
- Establish voluntary codes of practice, with an an examination of how websites handle videos or messages posted by users.
The move follows a government-commissioned report by psychologist Tanya Byron earlier this year, which called for the setting up of a child safety council, as part of a drive to protect children using the internet and digital technologies.
Mr Brown praised Dr Byron's report and her efforts in bringing the diverse organisations together as one council.
"This is the first in the world. It will be path-breaking and already I have been talking to prime ministers in other countries who are interested in this," he said.
John Carr, from UKCCIS, told the BBC the council offered a last chance for the online world to police itself.
"There are continuing levels of anxiety amongst parents, teachers and so on, about kids getting access to material they really shouldn't be seeing on the internet.
"If the internet industry doesn't respond and do this - clean up its act on a voluntary basis - they're going to get legislation and compulsion."
But Camille de Stempel, policy director of AOL Europe, which owns social networking site Bebo, told the BBC the industry was already doing a lot to protect children.
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"You install a lot of things like parental controls, education programmes, easy reporting mechanisms so people can report easily disturbing content, so it can be taken down.
"All social networking companies and internet companies have very stringent terms of service."