The charity's warning about the crisis came in a report that it called the largest mental health survey inside Syria during the war.
"They have seen their friends and families die before their eyes or buried under the rubble of their homes," the report said.
"They are the next generation who will have to rebuild their shattered country."
The report draws on interviews with over 450 children, parents, teachers and psychologists in seven Syrian provinces. The areas covered include Idlib, Aleppo and Kurdish-controlled Hasaka.
Two-thirds of the children interviewed had lost a loved one, had their house bombed or been injured during the war. A majority of them displayed severe emotional distress and lacked psychological support, the report said.
"My son wakes up afraid in the middle of the night. He wakes up screaming," the report quotes Firas, father of a three-year-old boy, as saying.
"A child was slaughtered in front of him, so he started to dream that someone is coming to slaughter him. When a child witnesses a beheading, how could he not get afraid?"
Effects observed in the children included sleep deprivation, withdrawn behaviour, suicide attempts and even losing the ability to speak.
One teacher interviewed in the besieged town of Madaya told the report's researchers that that pupils "draw images of children being butchered in the war".
The report also found that half of the children said that they rarely or never feel safe at school, while 71 percent said that they suffer from frequent bedwetting and involuntary urination.
Save the Children says that if the children are left untreated, the daily trauma could disrupt the development of their brains during a crucial formative period. This could lead to a host of problems in adulthood, including depression, heart disease and post-traumatic stress disorder.
The charity urged for the provision of more mental health programmes across Syria, as well as adequate funding for psychological resources and training for teachers.
