The rights watchdog said an aggressive campaign to recruit children had begun in mid-2017, with the jihadists taking reprisals against communities who refuse to cooperate.
Hundreds of children have fled their homes to avoid this fate, often alone, it said in a statement.
"Al-Shabaab's ruthless recruitment campaign is taking rural children from their parents so they can serve this militant armed group," said Laetitia Bader, senior Africa researcher at Human Rights Watch.
The practice was revealed to be taking place in three districts largely under Shabaab control, in the southern Bay region.
According to HRW, Al-Shabaab has opened large Islamic religious schools since 2015 in areas under their control, bringing in younger children and pressuring teachers to teach the Shabaab curriculum in schools and avoid "foreign teachings".
Village elders near Baidoa in southwestern Somalia told HRW that in September, Shabaab militants ordered them to hand over dozens of children between the ages of nine and 15.
"They said we needed to support their fight. They spoke to us in a very threatening manner. They also said they wanted the keys to our boreholes. They kept us for three days. We said we needed to consult with our community. They gave us 10 days," one resident told HRW.
The community refused to hand over the children, and has since received threatening calls including death threats.
That same month residents of Burkhaba district said Shabaab fighters had forcible taken at least 50 boys and girls from two schools to a village called Bulo Fulay, reported to host a "number of religious schools and a major training facility".
A large group of Shabaab militants returned two weeks later to another local school and threatened the teacher who refused to hand over the children, said HRW.
"They wanted 25 children ages eight to 15," the teacher told HRW
"They didn't say why, but we know that it's because they want to indoctrinate them and then recruit them."
In Berdale district -- also in the Bay region -- Shabaab has abducted elders who refuse to hand over children in at least four villages, said the statement.
According to HRW, hundreds of often unaccompanied children have fled their homes since the recruitment campaign began.
The watchdog said that while government had taken some steps to protect schools and students, it should work to identify recruitment drives, assist displaced children and ensure children "are not sent into harm's way."
The Shabaab has been fighting to overthrow successive internationally backed governments in Mogadishu since 2007 and frequently deploys car and truck bombs against military, government and civilian targets.
The Shabaab lost its foothold in the capital in 2011 but still controls vast rural areas.