Poor guidance is preventing large numbers of able pupils from disadvantaged backgrounds going on to higher education, the Sutton Trust report warned.
It was, instead channelling them into a "cul de sac of opportunity".
The report, to the National Council for Educational Excellence (NCEE), found state school teachers are often ill-equipped to offer adequate advice to students, particularly aspiring applicants to Britain's top universities.
Almost half would not encourage their brightest pupils to apply to Oxford or Cambridge, the report concluded.
Among the 30 policy proposals it recommended were early support and guidance to students and every secondary should have a lead teacher responsible for higher education information, advice and guidance.
The report concluded: "It seems that swathes of young people with the potential to go on to higher education are being missed by current advice and guidance provision."
More must be done to target prospective students while they are at school, it found.
James Turner, director of policy at the Sutton Trust, said: "All young people deserve realistic and informed advice... so they don't find themselves down a cul-de-sac of opportunity, wondering what could have been."
Higher Education Minister David Lammy said it was important that young people were given a chance to achieve their full potential.