An estimated 185,000 children were separated from their mothers in Britain.
Starmer apologised on behalf of the state for the lifelong trauma it had caused.
"On behalf of the whole country, I say it to every single person impacted: we are deeply and profoundly sorry," Starmer told parliament on Thursday, describing what happened to the victims as a "stain on our history".
"The state did not do enough to protect mothers, children, and families from harm, and for this systemic failure I am truly sorry."
Between 1949 and 1976, the British state and Christian churches created a system in which young women with children outside marriage were shamed and coerced into giving up their babies to comply with the social norms of the time.
The Church of England apologised for its role in June, acknowledging its involvement in running so-called "mother and baby homes" where unmarried women were sent, often against their will, during pregnancy or after giving birth and separated from their babies.
The state's apology follows similar apologies by Ireland and Australia, four years after Britain's human rights committee concluded that the government was "ultimately responsible" for the lack of protection for unmarried mothers and their babies.
Starmer said the government would spend Stg4 million ($A7.7 million) to help people access their adoption records, fund intermediary services that help people reconnect with family members and for research and testimonial projects to document the long-term impact.
Starmer had met a group of affected mothers and children at his Downing Street residence earlier on Thursday.
"There never was any shame for you. The shame actually is ours. The shame is on the state and all those that were responsible for this," he said.
