Dr Andrew Aligne who carried out the research at the University of Rochester said the study should serve as a "sobering wake-up call" to parents who still don't see the danger in smoking around their children.
He said: "We already know smoking isn't good for us and here's another reason.
"This study indicates that second-hand smoke accounts for a significant proportion of cavities in children."
Dr Aligne drew a link between passive smoking and child tooth decay after discovering that youngsters from poorer backgrounds had a higher incidence of dental cavities.
He and his colleagues analysed data collected from nearly 4,000 children.
He said: "When people hear about the results of our study, their gut reaction is to say, 'All you did was test for poverty'.
"But this relationship between cavities and second-hand smoking persisted after we controlled for many variables, including age, sex, race, region, dentist's visits, nutritional status and blood lead levels."
Dose effect
The research team found the higher the children's exposure to secondary smoke, the greater the number of cavities.
When people inhale tobacco smoke, they absorb nicotine into the body, which is converted to cotinine.
The children in the study were given dental examinations and subjected to tests to measure the level of cotinine - a nicotine-related chemical - in the bloodstream.
A total of 47% of the children in Aligne's study had cavities in deciduous (baby) teeth and 26% had cavities in permanent teeth.
Second-hand or passive smoke was most associated with cavities in deciduous teeth.
The researchers suggested this correlation was because younger children spent more time with their parents, therefore increasing their exposure if they were in a smoking environment.
The British Dental Association (BDA) remains sceptical, saying more research is needed before a causal relationship can be proven.
A BDA spokeswoman said: "There is considerable scientific evidence showing that tobacco can affect oral health in a number of ways, from minor aesthetic changes to gum disease and fatal cancers.
"In addition to the harmful pathological effects of tobacco use (both smoking and chewing), smoking is also associated with a range of unpleasant physical changes in the mouth and teeth."
Whatever conclusions are drawn on either side of the Atlantic, Dr Aligne hopes the study will encourage more dentists to discuss the ill effects of smoking with their patients.