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Measles can be viewed in developed countries as a mild childhood illness.
But the disease can kill, or leave children with lifelong disabilities such as blindness and brain damage.
The World Health Organization and the United Nations Children's Fund said successful vaccine programmes had led to the fall.
Malnourished and un-immunised children are at particular risk of contracting measles and are more vulnerable to death.
Children are not usually killed directly by measles, but by its complications.
A decade ago, measles was responsible for the deaths of many millions of children each year.
But the WHO/Unicef figures show the number of deaths caused by measles fell from 873,000 in 1999 to around 530,000 in 2003.
They estimate that means there were 60 deaths each hour from measles in 2003.
The largest reduction was seen in Africa, which is worst affected by the condition, where estimated measles deaths decreased by 46%.
'Remarkable progress'
Health experts say the fall has been made possible because of governments signing up to the WHO/Unicef immunisation strategy, which aims to ensure 90% of children are immunised against measles, and that all children get a second chance to be immunised.
Since 2001, funding of more than US$144m has helped African countries vaccinate over 150 million children against measles.
It costs less than US$1 to immunise a child with the measles vaccine. The jab can be given alone, or in combination with rubella or with mumps and rubella (the MMR vaccine) as in the UK.
Dr Jong-wook Lee, WHO Director-General, said: "Progress of this magnitude is remarkable. I congratulate countries for their successful efforts in protecting children from measles.
"I am certain that with increased commitment from governments and further support from the international community, even more can be accomplished."
Carol Bellamy, Executive Director of Unicef, added: "In many places where families once lived in fear of losing their children to measles, they're now protected by an effective and inexpensive vaccine.
"What clearer proof could there be of the value of investing in immunisation?"
She added: "We now have the opportunity to replicate this successful model as we tackle other child killers such as malaria."
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