The study looked at the consumption of sweet drinks by more than 16,800 Australian children.
The number of decayed, missing and filled baby teeth was 46 per cent higher among children who consumed three or more sweet drinks per day, compared with children who did not consume sweet drinks, researchers from the University of Adelaide found.
Researchers said any health warnings about soft drinks should include the risk of tooth decay.
"There is growing scrutiny on sweet drinks, especially soft drinks, because of a range of detrimental health effects on adults and children," said Dr Jason Armfield from the Australian Research Centre for Population Oral Health at the University of Adelaide's School of Dentistry.
"Tooth decay carries with it significant physical, social and health implications, and we believe the risk of tooth decay should be included in any warnings relating to sweet drinks," he said.
The study found that 56 per cent of Australian children aged 5-16 years consumed at least one sugared drink per day and 13 per cent consumed three or more sugared drinks on average per day.
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Boys consumed more sweet drinks than girls and children from the lowest income families consumed almost 60 per cent more sugared drinks.
"Consistent evidence has shown that the high acidity of many sweetened drinks, particularly soft drinks and sports drinks, can be a factor in dental erosion, as well as the sugar itself contributing to tooth decay," Armfield said.
"Our study also showed that greater exposure to fluoridated water significantly reduces the association between children's sweet drink consumption and tooth decay. This reconfirms the benefits of community water fluoridation for oral health," Armfield said in a statement.
"Essentially, we need to ensure that children are exposed less to sweet drinks and have greater access to drink fluoridated water, which will result in significantly improved dental outcomes for children," he said.
"If health authorities decide that warnings are needed for sweet drinks, the risk to dental health should be included," he added.
The study was published in the American Journal of Public Health.