UNICEF said deaths in that category hit a record low of 9.7 million from almost 13 million in 1990, and hailed what it called "solid progress on child survival."
There were rapid declines in annual under-five deaths in Latin America and the Caribbean, central and eastern Europe and the former Soviet republics, East Asia and the Pacific as well as many parts of Africa, it said.
"This is an historic moment," said UNICEF executive director Ann Veneman. "More children are surviving today than ever before. Now we must build on this public health success to push for the achievement of the Millennium Development Goals (MDGs)."
The poverty-reduction MDGs include a commitment to reduce by two-thirds the under-five mortality rate between 1990 and 2015.
UNICEF attributed the gains to the widespread adoption of basic health measures, including early and exclusive breast feeding, measles immunization, Vitamin A supplements and use of insecticide-treated bed nets to prevent malaria.
But Veneman warned against complacency.
"The loss of 9.7 million young lives each year is unacceptable. Most of these deaths are preventable and, as recent progress shows, the solutions are tried and tested," she said.
"We know that lives can be saved when children have access to integrated, community-based health services, backed by a strong referral system."
Sharp drops have been reported in many countries since the previous surveys conducted in 1999-2000, with Morocco, Vietnam and the Dominican Republic cutting their under-five mortality rates by more than one third while Madagascar did so by 41 percent and Sao Tome and Principe by 48 percent, UNICEF said.
Of the 9.7 million children who died in 2006, 3.1 million hail from south Asia and 4.8 million from sub-Saharan Africa.
The surveys also showed that child mortality in the developing world is much higher among children living in rural areas and in the poorest households.
Countries in the developed world report just six deaths for every 1,000 live births.
The Latin American and Caribbean region is meanwhile on course to achieve the child mortality MDG, with 27 deaths on average for every 1,000 live births, compared to 55 per thousand in 1990, UNICEF said.
Significant progress was also reported in parts of sub-Saharan Africa, with under-five mortality down 29 percent between 2000 and 2004 in Malawi, UNICEF said.
In Ethiopia, Mozambique, Namibia, Niger, Rwanda and Tanzania child mortality rates declined by more than 20 percent last year.
Child mortality rates were highest in west and central Africa while in southern Africa hard-won gains were undermined by the spread of HIV-AIDS.
UNICEF said the figures, compiled from a range of national data sources, buttress reports of progress released earlier this year on measles mortality, with a 60 per cent cut in measles deaths since 1999, and a 75 percent reduction in sub-Saharan Africa.