"This is a historic moment," Ann Veneman, Unicef executive director, said.
Veneman said: "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 has attributed the gains to the adoption of basic health measures, including early and exclusive breast feeding, measles immunisation, Vitamin A supplements and the 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 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 per cent and Sao Tome and Principe by 48 per cent, 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.
"Loss of 9.7m young lives each year is unacceptable. Most of these deaths are preventable"
Ann Veneman, Unicef Executive Director
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 also 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 per cent between 2000 and 2004 in Malawi, the agency said.
In Ethiopia, Mozambique, Namibia, Niger, Rwanda and Tanzania child mortality rates fell by more than 20 per cent last year.
Child mortality rates were highest in west and central Africa, while in southern Africa gains were undermined by the spread of HIV-Aids.