About 11,500 traditionally nomadic Indians are crammed onto a reservation in Mato Grosso do Sul state. Infant mortality and suicide rates are up to three times higher than national averages on the reservation, originally created to house 300 people.
"It's become a concentration camp," said Senator Delcidio Amaral, upper- house leader for the ruling Workers Party. "Our Indian policy has gone wrong."
"Something is going wrong if so many children are dying, and it could get worse," Amaral said.
Senators and local officials at a congressional hearing warned Indians could invade local farms if they did not get land and assistance to help end their inhuman confinement.
Pictures of dead Indian children published over the last two weeks have shocked Brazilians after centre left President Luiz Inacio Lula da Silva promised to improve conditions for indigenous communities that have suffered centuries of abuse.
Brazil's Congress promised a committee to investigate malnutrition and overcrowding on reservations.
Indian agency officials and activists said more aid and assistance would only dull the pain.
"The structural problem is a lack of land," said Mercio Pereira Gomes, head of the government's Funai Indian agency which oversees Indian reserves.
Brazil's Indian population has grown from 400,000 at the end of the 1980s to 734,000 in the latest census in 2000.
The growth has strained the reservation system and Indians want to move onto new ancestral lands – as is their right under Brazil's constitution.
The 12-square-mile Dourados reservation was created 90 years ago in an area of savannah and forest now converted into one of the world's largest grains growing areas.