The findings were in stark contrast to the makeup of British schoolchildren, of whom 32% come from minority backgrounds, according to the Department for Education.
The report was carried out by the Center for Literacy and Primary Education and funded by Arts Council England.
The report said that in books where characters did explore their ethnic identity, plots often focused on "the refugee experience" or "biographies of key figures who had overcome significant adversity."
As part of its recommendations, the report said BAME characters "should not be predominantly defined by their struggle, suffering or 'otherness.'"
"If in their formative years, children do not see their realities reflected in the world around them or only see problematic representations mirrored back at them, the impact can be tremendously damaging," the study said.
It added that BAME characters were more likely to be featured as part of a multicultural cast, rather than as a lead character.
BBC journalist Tina Daheley, who grew up in London and comes from a Sikh family, said she "didn't see myself in children's stories growing up."
"Stunned that in 2018 there's still a whole generation of children that don't see their lives reflected in books," Daheley tweeted Tuesday, adding: "EVERYONE benefits from proper representation."