Even listing the names of agencies that a young person has contacted, such as a teenage pregnancy centre, can be problematic, they said.
"They are worried that if teachers know that a youth offending team is involved with a child who is on the borderline of being expelled then it may lead to them being expelled," one local education authority said. "Our response is that we must change how schools respond, not stop the sharing of information."
The findings are revealed in a report commissioned by the Department for Education and Skills which looked at 15 LEAs which have trialled databases on children's welfare.
The Children Bill, which had its second reading this week in the House of Commons, will require closer working and sharing of information between schools and other agencies.
Researchers from the University of London found that a major problem was that teachers and social workers were not sure what information they were allowed to share.
"Most trailblazers found that information-sharing produces high levels of anxiety among practitioners," the report said.
"They continue to worry that they may be taken to court if they get it wrong."
The 15 pilot databases vary widely in the amount of information they include because the local authorities involved were given varying legal advice.
Some only contain data on a child after parents have given consent and simply list the services a young person has visited, displaying flags where staff have concerns. Others allow teachers to register details such as the numbers of school days a pupil has missed and worries about a child's performance in class.
Despite the obstacles, most of the pilot authorities were positive about their work with the databases and were confident they would improve child protection.
Parents who were interviewed said the systems were not "Big Brother-ish", the report said, and many expressed surprise that the systems did not exist already. But some young people were "concerned that only negative aspects of their lives were passed on".
The DfES hopes to use the findings from the 15 pilots to help the other 135 English LEAs when they develop their databases over the next four years.
Developing Identification, Referral and Tracking Systems is at www.dfes.gov.ukresearch