In a study, it warned "high risk" offenders were not being locked up for long enough to take part in treatment.
The maximum penalty for possession of child sex abuse at the Crown Court is 10 years in prison but Napo uncovered sentences of jail terms of under a year, or punishment in the community. Paedophiles were also not being made to join sex offender treatment programmes, despite recommendations from probation officers, the report said.
Assistant general secretary of Napo Harry Fletcher said: "These are not victimless crimes. There is an urgent need to review sentencing practice and law to ensure that risk to children is minimised."
He also warned proposed cuts to probation funding would mean fewer paedophiles going into treatment and a greater risk to vulnerable children. The dossier contains evidence of 68 cases from 20 probation areas across England and Wales.
In one case, an unnamed offender was caught with more than 24,000 indecent images including those at level five, the most serious forms of abuse.
In spite of being deemed high risk to children, he was given a 12-month jail term and calls for an intensive treatment programme were not followed.
In another a man caught with 21,000 images, including very serious abuse, was given an 18-month term with no treatment attached.
Sex offender treatment programmes are available in 26 out of the 140 jails in England and Wales. There are more than 7,500 sex offenders behind bars.
A Prison Service spokesman said about 2,400 paedophiles were treated on its Sex Offender Treatment Programme last year.
He said: "Sentencing in individual cases is entirely a matter for the courts."