Sharing explicit images of under-18s is an offence even if they are taken by the teenagers themselves.
But new search powers introduced to help schools impose discipline give teachers the power to search for and delete inappropriate images from pupils' phones.
Mrs Miller told the Mail that schools are now deleting the photographs from one mobile handset and disciplining pupils discreetly, without investigating how far the images have spread.
She said that children must be taught that sharing explicit images is a sexual offence.
Mrs Miller, who resigned as Culture Secretary earlier this year, warned: "Simply deleting that image on the camera that took the photo ignores the very real problem that they have been distributed far more widely.
"The idea of sending illegal sex abuse images is not part of teenage life. It is often something that happens at the start of a relationship before emotional ties are formed.
"These illegal, indecent images are often circulated far more widely than the original personal who took the photograph intended."
She added: "It is a sexual offence, it is the worst sort of crime. It is storing up a real problem for those young people.
"Those images are going to stay with them forever. That is what young people are not aware of."
Mrs Miller said that by allowing schools to delete images from young people's phones headteachers might not be 'addressing the scale of the problem'.
She said: "There is no statutory duty for schools to report sexting but they do have a duty to report criminal offences.
"But the Home Office doesn't seem to have the records which will set out how many offences have been reported."
Mrs Miller, who has recently held talks with child abuse law experts in the US about how to tackle the problem, added: "Schools have been left in a really invidious position. They have the authority to delete images.
"They are undoubtedly doing a great deal to support teachers and young people who are affected by sexting, but I am concerned that there seems to be a lack of information about how many of these incidents are reported to police."
She stressed that she did not want to criminalise every young person but to 'ensure those images are removed and to make sure we are fully aware of whether there is the involvement of third parties asking for those images to be generated in the first place'.
Claire Lilley, head of child safety online at the NSPCC, told the newspaper: "NSPCC research shows 'sexting' is playing an increasingly insidious role in young people's relationships.
"While we wouldn't want children who do this to be prosecuted apart from in the most extreme and exceptional cases, it's important to remember that taking and sharing any indecent image of a child, even when it was taken with their consent, is a serious offence."
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