It says families who are caring for terminally ill children at home should have 24-hour access to specialist medical support and advice.
Estimates suggest there are close to 40,000 terminally ill children and young people in England.
Research says 68% of families would prefer to spend their final days together at home, and that this desire increases to 80% when the child is thought to be in their last month of life.
However, the 2012 British Social Attitudes Survey found nearly two thirds of people (adults and children) would change their minds about dying at home if sufficient support from family, friends and healthcare staff were not available.
And research from Dying Matters found half of expected deaths currently happen in hospital, despite almost one in three of us saying we would prefer to die at home.
NICE says families caring for a terminally ill child should be supported so that the child can receive the right care, in the environment of their choice. This will mean they can enjoy the highest quality of life possible.
Professor Gillian Leng, deputy chief executive at NICE, said: “A hospital is not always the best place for a dying child. Sometimes being cared for at home, in familiar surroundings with the people they love beside them can be much more beneficial.
“We need to make sure families have the support they need. Children should be able to access the right care in the right place for them.
“The final moments we spend we loved ones can form some of the strongest memories. We have to get it right.”