With government figures showing almost one in five addicts in India is under 21, the Supreme Court said more needed to be done to educate young people about the dangers of substance abuse in India.
The court ordered New Delhi to "evolve a national action plan within six months to combat drug abuse amongst school children".
It said the government should conduct a national survey to determine how widespread the problem was, and include education about drugs in the school curriculum.
"Trafficking and drug abuse, inherently linked to each other, are the most prevalent forms of organised crime in the world," said Satyarthi in response to the judgement.
"This petition was filed to ensure that children are provided with a better, more healthy childhood," he said in a statement.
Satyarthi's Bachpan Bachao Andolan (Save Childhood Movement) filed the petition before the Supreme Court in 2014.
It asked the court to order the government to create rehabilitation centres in each district of India, with a special wing for children.
It also urged a national action plan on substance abuse, to include counselling and rehabilitation.
Experts say peer pressure and academic stress are driving children as young as 11 to drugs.
Almost one in five of India's drug and alcohol addicts are under the age of 21, according to a 2013 report by the National Commission for the Protection of Child Rights.
Nearly five percent are aged between 12 and 17 years, the report found.
