The impact on institutionalised children points up the urgency of the need to remove them from institutions and provide support for family and community care, the watchdog said.
Russia-Ukraine war has had "devastating" consequences for children in residential institutions, with thousands transferred to occupied territories or to Russia, Human Rights Watch said.
In a report released on Monday, the watchdog also said the war highlighted the urgent need for reform in Ukraine, which had over 105,000 children in institutions before the conflict, the largest number in Europe after Russia.
"This brutal war has starkly shown the need to end the perils faced by children who were institutionalised," said Bill Van Esveld, associate children's rights director at the New York-based organisation.
"Returning children who were illegally taken by Russian forces should be an international priority," he added.
At least several thousand children have been transferred to Russia or occupied territories, the report said.
It added that 100 institutions that had housed over 32,000 children before 2022 are now in territories under Russian occupation.
For nearly two decades, Ukraine has tried to reform the system but the number of children's institutions has only grown - from 663 in 2015 to 727 in 2022, the report said.
Many more children will be left orphaned or separated from their parents as a result of the war.
"Children are being newly institutionalised, including children whose parents were killed and wounded, as well as whose parents experienced mental health crises due to the war," the watchdog said.
The 55-page report also highlighted other problems including mental trauma of the displaced children and neglect and inadequate care due to lack of caregivers.
"Many children in institutions had to shelter for weeks from bombardments in basements without electricity or running wat er, including children with disabilities," the report said.
"A group of children from an institution in Mariupol did not speak for four days after they were evacuated to Lviv, in March 2022."
A two-year-old boy from an institution for children with disabilities in the central city of Kropyvnytskyi "was in a basement for eight weeks," and when he was evacuated "he smelled like earth," a caregiver in Lviv told HRW.
The watchdog also said that thousands of children from institutions had been displaced abroad and some remain unaccounted for.
Ukraine: Perils of War for Children in Institutions https://t.co/AakWhfM931— Human Rights Watch (@hrw) March 13, 2023