Sue Berelowitz, Deputy Children's Commissioner, said abuse was taking place in "leafy rural areas" as well as inner cities, and involved organised gangs as well as lone paedophiles using computers.
Although the focus has been on men of Pakistani origin abusing vulnerable white girls, she said that people of all races and backgrounds are seeing others in their community as providing "easy access" for exploitation.
Some youths are using the latest mobile phone technology to invite their friends to join in the raping of girls, or filming the assaults in a form of blackmail, while adults are masquerading as teenagers to befriend young people on Facebook.
Boys are trying to copy what they see in online pornography and parents are powerless to stop them accessing it because such images can be easily viewed on mobile phones as well as home PCs, Mrs Berelowitz said in stark testimony to the Home Affairs Select Committee.
Asked by MPs how many victims she estimated there were, she replied: "We're talking about thousands. We are talking about a big problem.
"People need to lay aside their denial and face up to the fact that some truly terrible things are being done."
The Committee had invited Mrs Berelowitz to give evidence about the sexual exploitation of children through "localised grooming" on Tuesday in the wake of a high-profile case in Rochdale. Last month nine men were jailed for up to 19 years for plying five victims with drink and drugs and "passing them around" for sex at takeaway restaurants.
But the Deputy Children's Commissioner, who has been gathering evidence ahead of a report due in September, shocked MPs as she detailed the scale of the problem and gave graphic illustrations of what is being done to children in communities across England.
She said that although the Rochdale case involved one particular "pattern" of men from one ethnic background abusing girls from another, these different around the country.
"What I am finding, I regret to say, is that there are parts of every single community - white, Pakistani, Afghan, Gypsy and Romany traveller, you name it - who are seeing children as easy access in terms of sexual exploitation. In terms of victims, we are seeing the same kind of profile."
In London, black gangs were attacking black children while on an estate in the north of England, white men were pursuing white girls.
Mrs Berelowitz agreed the vast majority of people in each area were horrified by what was happening, but added: "There are always horrible people within every community who will take every opportunity to hurt children, but they are a minority."
She quoted a police officer who was investigating exploitation in a "lovely leafy rural area" who told her: "There isn't a town, village or hamlet in which children are not being sexually exploited."
The watchdog said: "In urban, rural and metropolitan areas, I have hard evidence of children being sexually exploited. That is part of what is going on in some parts of our country. It is very sadistic, it is very violent it is very ugly."
She described one case, which she claimed was "quite common", where a girl had been contacted online and told to go across London to meet someone she thought was a friend, only to be met by eight boys who raped her in a park before another gang took advantage of her.
Elsewhere in the capital, girls as young as 11 were expected to take part in sex with "line-ups" of boys, while others used the free "BBM" instant message feature on BlackBerry smartphones to "summon" their friends to join in rapes.
"Boys were being called while some were raping the girl to say 'come, come, come, you can join in too' and they were arriving and elbowing each other out of the way to rape her."
One police force had shown Mrs Berelowitz a list of more than 1,000 teenage girls who had been befriended by a man in his 40s on Facebook, who had pretended to be a boy their age.
"We have gathered quite a lot of evidence to show that there is no doubt that social networking sites can be a source of real problems for this," she said.
Teenagers are also filming sex abuse on mobile phones as using it as a way of keeping victims "entrapped", while girls are encouraged to take compromising photos of themselves which were then shared beyond their control.
She also blamed easy access to extreme pornography for making the problem worse.
"We've had boys say to us - some of the boys I've spoken to who've been involved in sexual exploitation - 'it was like being in a porn movie'.
"They have watched things and then they've enacted them."
She went on: "Parents may think they can control what's going on because they can have a blockage on the computer but the reality is children can get anything they like on their mobile phones. And they are.
"It has definitely affected children's thresholds of what they think is normal."