After a similar move infuriated Saudi Arabia last year, the latest draft report placed the coalition on a separate section of the list which recognized that measures had been taken to improve the protection of children.
"In Yemen, the coalition's actions objectively led to the listing for the killing and maiming of children, with 683 child casualties attributed to this party, and, as a result of being responsible for 38 verified incidents, for attacks on schools and hospitals during 2016," said the draft report.
Yemen's government forces, pro-government militias, the Huthi rebels and Al-Qaeda in the Arabian Peninsula (AQAP) were also blacklisted as parties to the conflict but they have failed to take measures to protect children, the draft said.
Saudi Arabia leads an Arab military coalition that intervened in Yemen in 2015 to support the government of President Abedrabbo Mansour Hadi after Iran-backed Huthi rebels forced him into exile.
The United Nations has listed Yemen as the world's number one humanitarian crisis, with seven million Yemenis on the brink of famine and cholera causing more than 2,000 deaths.
Former UN chief Ban Ki-moon last year was forced into an embarrassing climbdown and removed the coalition from the list after Saudi Arabia threatened to cut off funding to UN humanitarian programs.
Ban had publicly complained that it was unacceptable for countries to "exert undue pressure" on the United Nations to avoid scrutiny of its actions.
Saudi Arabia denied that it had pressured Ban and has insisted that the coalition is respecting its obligations under international humanitarian law.
Children dying from coalition bombs
Human rights groups had pushed UN Secretary-General Antonio Guterres to return the coalition to the blacklist and send a strong message about the horrific toll that the war has taken on children.
The final report and the list contained in an annex is expected to go to the Security Council later this month and the top UN body will hold a debate on children and armed conflict on October 31.
Watchlist on Children in Armed Conflict, which groups leading human rights organizations, said it hopes that the draft listing will make it into the final report.
"Watchlist has documented many instances of the coalition's attacks in Yemen, and naming the coalition as responsible in the secretary-general's annual report is hopefully the first step in holding it accountable and stopping these atrocities," said Eva Smets, executive director of Watchlist.
The draft report indicates that Guterres "believes the Saudi-led coalition has taken positive measures, but we continue to receive disturbing reports of children dying from preventable diseases and the coalition's bombs," she added.
To avoid a repeat of last year's clash, Guterres this year presented the list in advance to Saudi Arabia and Yemen, and discussed measures that could be taken to be taken off the list, a UN diplomat said.
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