Chief inspector of schools Amanda Spielman said nearly all children fell behind and struggled with key skills as they endured a "hokey-cokey education".
She said loneliness, boredom and misery became "endemic", physical and mental health declined and many youngsters were sucked into gang violence and sexual exploitation.
Ms Spielman, who launched Ofsted's annual report for the 2020-21 academic year yesterday, said of the vanishing pupils: "I've been talking about the problems of children disappearing from school rolls for some time now.
"We know how hard it became during the pandemic to work out who was still in the country and who was still taking part in school at all.
"There's a real need now to pin down where children are. I've been pushing for a register of home-educated children for a long time. Plans were put on hold due to the pandemic."
The Ofsted report said: "In primary and secondary schools, children struggled with a hokey-cokey education: in the classroom, at home, separated in bubbles, isolating alone.
"Further education students and apprentices saw their classroom doors closed, their placements curtailed and their job prospects limited."
The watchdog also raised fears about children in care feeling less safe due to lockdown curbs and broken relationships with staff.
Mark Russell, of The Children's Society, said: "This shocking report lays bare how lockdowns have left many children more vulnerable to harm, struggling with their mental health and at risk of grooming by perpetrators out to sexually or criminally exploit them. Some vulnerable children have still not returned to school."
And Anntoinette Bramble, of the Local Government Association, called for a children's services funding shortfall of £600million a year to be addressed.
Ofsted said the impact of Covid had been particularly acute among the youngest children. Not only was their development and progress hampered, some even regressed.
And many high achievers also struggled with motivation away from school.
Ofsted now wants schools to offer sport and extra-curricular activities to ensure children "regain a sense of normality" in their lives.
But teaching unions say disruption to schooling is only likely to worsen due to the Omicron virus variant.
What is happening where you live? Find out by adding your postcode or visit InYourArea
----------------