Prime Minister Gordon Brown apologised for Britain's role in sending thousands of children to Australia and other former colonies where many suffered physical and sexual abuse.
The Child Migrants Programme, which ended 40 years ago, shipped an estimated 150,000 destitute children to a "better life" in Commonwealth countries such as Australia and Canada but many ended up in institutions or as farm labourers.
Mr Brown said the scheme, which ran from the 1920s to the 1960s, left many people emotionally scarred for life.
"I say today we are truly sorry. They were let down," he said in a statement to Parliament.
"We are sorry that instead of caring for them, this country turned its back. We are sorry that the voices of these children were not always heard, their cries for help not always heeded.
"And we are sorry that it has taken so long for this important day to come and for the full and unconditional apology that is justly deserved."
Mr Brown said the participants in the scheme were "robbed" of their childhood.
"The pain of a lost childhood can last a lifetime. Some still bear the marks of abuse; all still live with the consequences of rejection," he added.
A €6.8 million fund has been established for the former child migrants.
Children aged between three and 14 were sent from Britain to Commonwealth countries with the promise of a new start, but many were abused in foster homes, orphanages and religious institutions by their supposed carers.
Many were already in institutions in Britain and were often told their parents were dead before they left, while parents were given little information about where their offspring were going.