The drug, which is called Seroxat outside the United States and is made by British-based GlaxoSmithKline, is not licensed for use in children and teenagers anywhere in the world. However, some doctors give it to treat depression, based on their own judgment.
The new research, provided to Britain's Medicines and Healthcare products Regulatory Agency by GlaxoSmithKline, does not apply to adults, the regulators said.
Britain's Department of Health said the evidence provided by the drug company, from nine studies based on more than 1,000 youngsters, shows there is an increase in the rate of self-harm and potentially suicidal behavior in those under 18 taking Paxil.
GlaxoSmithKline spokesman David Mawdsley said the rate of a collection of emotional side-effects, ranging from mood swings and increased crying, to suicidal thoughts and self-harm, was twice as high in the Paxil group as in those taking a fake pill. A total of 3.2 percent of patients on Paxil had the emotional side effects, compared with 1.5 percent of those taking the dummy pill.
"It has become clear that the benefits of Seroxat in children for the treatment of depressive illness do not outweigh these risks," the government said in a statement. "Young people under 18 years currently taking Seroxat for depression should consult their doctor."
Alasdair Breckenridge, chairman of the regulatory agency, said the benefits for adults of taking Seroxat for depression were well known.
"It is important that patients who are benefiting from Seroxat should not be alarmed by the announcement and should continue their treatment," he said.
An expert advisory panel was set up last month to look into the effects of Paxil and other medications in its class, known as selective serotonin reuptake inhibitors, or SSRIs.
"The expert group will be examining urgently what implications, if any, these new findings have for the use of Seroxat in adults," said the panel's chairman, Ian Weller. "At present the evidence is not sufficient to confirm a causal association between SSRIs and suicidal behavior in adults."
It is estimated that almost 17 million people worldwide have been treated with Paxil.