Children are most commonly exploited as prostitutes and as models for pornographic photographs and films, with the operations having become highly organized on a nationwide scale. Child pornography, however, is generally a 'cottage industry,' with production occurring surreptitiously in private homes and motel rooms. The exploiters and the market audience for child exploitation are thought to be pedophiles, who are predisposed to use children sexually and to turn to them as a result of conflicts in adult relationships. Most pedophiles are heterosexual, with female children being the most common victims. Exploited children are typically runaways who come to large cities with little or no money and are thus vulnerable to the financial and material enticements of the sexual exploiters. The use of 1978 Federal Protection of Children Against Sexual Exploitation Act has been limited because it covers only the distribution of child pornography for commercial purposes, which excludes the vast network for loaning, trading, or exchanging material among pedophiles. State laws in this area are also reviewed, as are child prostitution laws. Advice on effective prosecution under such laws is offered, and some needed services for child victims/witnesses are identified. In conclusion, recommendations are provided from the General Accounting Office's report on the prevention of child sexual exploitation and the rehabilitation of its victims. Twelve footnotes are provided.