The institute, a health policy advisory center affiliated with the National Academies, urged higher federal and state taxes on alcoholic beverages, tougher state drinking laws, better state identification cards and improved policies for detecting and stopping underage drinking parties.
As the report was being issued, the alcoholic beverage industry said it will increasingly target its advertising away from youth.
The Beer Institute and the Distilled Spirits Council of the United States said their members plan to limit advertising to media with 70 percent adult audiences.
The current standard is a majority adult audience - over 50 percent - and the Federal Trade Commission said Tuesday, in its own report, that the industry has improved to 99 percent compliance.
The FTC study was issued at the request of Congress because of the suspicion that newly popular flavored alcoholic melt beverages were being targeted at youth.
The FTC concluded that was not the case but noted that young legal drinkers and the underage tend to watch many of the same shows and read the same magazines.
Besides advertising, the FTC said national alcohol policy should deal with the ways underage drinkers obtain beverages they cannot legally drink.
Nonetheless, Jim O'Hara of the Center on Alcohol Marketing and Youth at Georgetown University said alcohol companies have to do more to keep their advertising from reaching children.
"There's still too much advertising in the magazines and on the television and radio programs that attract our kids," he said.
The Center for Science in the Public Interest welcomed the Institute of Medicine report as "a historic first step toward ending decades of complacency about one of the most damaging and widespread public health and safety threats facing society."
Alcohol use is deeply rooted in American society, the report observed, but underage drinking is a significant factor in traffic fatalities, suicide, violent crimes and academic failure.
Richard J. Bonnie, a professor at the University of Virginia and chairman of the institute's committee that prepared the analysis, said a major goal needs to be to persuade adults to avoid behavior that would encourage underage drinking.
The need is a "comprehensive program involving all sectors of society and a common acceptance of responsibility," he said.
The committee estimated the cost to American society of underage drinking at $53 billion annually in losses stemming from crime, traffic crashes and other activities.
A 2002 study found that 72 percent of 12th graders and 39 percent of eighth graders reported having consumed alcohol in the previous year.
Federal and state excise taxes are potentially important tools for preventing and reducing underage drinking, the report suggests. The committee said that even small changes in these taxes can reduce drinking by youths, who tend to have limited incomes.
Bonnie said he expects opposition to higher taxes, but evidence shows that they have a significant impact on youth drinking.
The suggestion drew prompt opposition from Jeff Becker, president of the Beer Institute, who charged that the report "relied on a compilation of existing information, much of which contained erroneous conclusions. ... Given this, we are not surprised to see misguided recommendations such as raising beer excise taxes."
State taxes vary, but federal alcohol taxes amount to $2.14 per 750-ml bottle of 80 proof spirits, 33 cents per six-pack of beer and 21 cents per bottle of wine.
Among the report's recommendations:
The National Academies is an independent organization that provides advice to the government under charter by Congress. It includes the National Academy of Sciences, National Academy of Engineering, Institute of Medicine and National Research Council.
By Randolph E. Schmid