Many children were baptised and raised as Catholics during the war, a fact that often helped conceal their identities from the Nazis. But after the fighting, the Vatican apparently did not want baptised Catholics returning to Jewish communities.
Jewish groups have accused wartime pontiff Pius XII, who reigned from 1939 to 1958, of doing too little to stop the Holocaust or to help Jews escape it.
The Vatican has denied the charges, but the letter, unearthed by Italian historian Alberto Melloni, is likely to fuel the debate on Pius's attitude toward Jews.
"Children who have been baptised cannot be entrusted to institutions that do not know how to ensure a Christian education," read the letter, written by the Vatican's doctrinal department.
"If the children were entrusted (to the Church) by their parents and if their parents now claim them, they can be returned so long as these children have not received baptism."
The same directive offered instructions about how to respond to requests for information.
"Avoid, as far as possible, responding in writing to the Jewish authorities, but do so orally," it said.
The letter explicitly said that the orders came from Pius himself: "Note that this decision ... was approved by the Holy Father." It was sent to the Holy See's envoy in France, Archbishop Angelo Roncalli, who later became Pope John XXIII.
Pius's pontificate has been one of the trickiest problems in post-war Catholic-Jewish relations.
In 1998, there was widespread Jewish discontent with a Vatican document called "We Remember, a Reflection on the Shoah", which effectively absolved Pius of accusations that he facilitated the Holocaust by remaining silent.
But the current pontiff, Pope John Paul, has strongly defended Pius and once called him "a great pope".
The Vatican maintains that Pius did not speak out more forcefully because he was afraid of the worsening fate of Catholics, as well as Jews, in Germany and Nazi-occupied countries.
Two years ago, the Vatican opened selected archives related to Pius in a move it said was meant to "bring an end to unjust and thankless speculation".
The 1946 letter, published in Italian newspaper Corriere della Sera this week, may spark more controversy.
Melloni, who came across the document while working on a compilation of Roncalli's unpublished diaries, due out next year, said it raised important questions about the intentions of the Church while shielding Jewish children from the Holocaust.
"What is difficult to understand at this point was how much this heroic behaviour was done because these people were in danger, and how much of it was done because these people were Jewish," he told Reuters.
He said he did not know how many children were affected by the Vatican instructions.
"We only have personal accounts. We do not have serious research on this. Not yet," he said.