A government commissioned written by child psychologist Dr Tanya Byron, who appears on TV's 'House of Tiny Tearaways', says that computer games can harm the development of children's beliefs and value systems and desensitise them to violence.
Her report comes just a week after the courts caused controversy by overturning a ban on the violent game, which the had rejected for gratuitous violence and "sustained and cumulative casual sadism".
The overturn of the ban means the game can now be sold with an 18-certificate.
At present, only games showing sex or gross violence require an age rating from the BBFC and fewer than 2% of titles carry an 18-certificate.
Other games come under a voluntary European-wide scheme, meaning that less than 3% carry an 18-certificate.
Dr Byron wants a single system with ratings displayed prominently on packaging, like cigarette health warnings, as well as on shop display cases.
She wants all games involving weaponry and combat to be given an age certificate because she claims the current situation is too confusing and not tough enough.
The 16-page report also addresses the danger of children's use of the internet and calls for a massive campaign to educate parents and children about how to get the best from the internet without being exposed to dangers.
Byron said: "You would not send your child to the pool without teaching them to swim, so why would you let them online without teaching them to manage the risks."
Baroness Buscombe, chief executive of the Advertising Association, said: "The Advertising Association welcomes the publication of Dr Tanya Byron's review. The review highlights the important work undertaken by the Advertising Association's digital media group and recognises that the industry project for future proofing self regulation of advertising on digital media is well underway.
"Furthermore, by recommending awareness campaigns she demonstrates how the positive power of advertising will continue to help close the digital divide by creating informed consumers and giving everyone the opportunity to become a digital native."