Every year, tens of thousands of children disappear in India and many are trafficked to work in restaurants, craft industries, brick kilns, factories or beggars and brothels.
Police in the southern state of Telangana developed the facial recognition tool as part of Operation Smile, a periodic impulse to address child labor and missing children.
They scanned more than 3,000 records in the application and were able to gather more than half of the children with their families in January.
"The results are very encouraging," said senior officer Swathi Lakra, who oversaw the campaign.
"Previously, the big challenge was what to do with the children after we rescued them, and staying in shelters for a long time was not the ideal solution. Tracking their families and sending them home was a must."
Bringing together rescued children with their families is a gigantic task in India, a country of 1.3 billion people, and advocates for children's rights say that lack of training and lack of coordination between different states have hindered efforts from the police to do it.
The application uses a centralized database of photographs and identifies up to 80 points on a human face to find a match, making it easy to search even if only old photographs are available, police said in a statement.
It can match a million records per second and includes a name search tool that can focus on the parents or the missing child's village using phonetics to avoid the common problem of proper names misspelled in the records.
The application is periodically updated with data from shelters that house rescued children from the streets or from slavery.
Facial recognition of artificial intelligence has sparked a global debate, and critics say that technology can violate people's fundamental rights and violate data privacy rules.
The technology was tested last year by the Delhi police, who said they had identified almost 3,000 missing children in just a few days.
Supreme Court attorney N S Nappinai, an expert in data privacy legislation, said it was important to have effective measures to unite children with their parents, but asked for caution on how their data was stored.
"It is essential to know how the data will be collected, how long it will be stored, how it will be used in the future and, most importantly, when it will be deleted," he told the Thomson Reuters Foundation.
Varsha Bhargavi, an advisor to the Forum for the Protection of the Rights of the Child in Telangana, said that the police had been able to rescue thousands of children while driving, but that in the past he had had trouble returning them home.
"There are huge gaps in the rehabilitation of these children, with funds that are not used and repatriation to their homes is slow. The application can change the rules of the game," he said.