The unit was designed independently by Than Shwe as means to create a "private family army" that will aid his efforts to control the parliament and the army after the 2010 elections.
"It was arranged by the old man [Than Shwe] and regular majors don't even have any say in it," said a source close to senior army officials, speaking to DVB on condition of anonymity.
The majority of the unit is made up of children of ethnic origin who were orphaned during Burmese military operations in Karen and Shan state around 15 years ago, he said.
He added that military training given to the unit was of a superior quality than regular army training. The children were trained at No. 6. Central Divisional Training School near Oktwin, in Bago division, and Yeh Mon training school in Rangoon division.
"The orphans were collected from various places and are quite old now, but they could be exploited and handled," he said. "No one else gives them orders as it is a matter that can only be decided by [Than Shwe]."
According to Aye Myint, who runs the Guiding Star legal advocacy group, which represents child soldiers in Burma, suspicion among the army's top brass is high.
"Politically, the situation is that the generals can't trust one another and they are adopting the children to create private family armies," he said.
Human Rights Watch claimed in 2002 that some 20 percent of the Burmese army could be under-18. Burma is thought to have more than 400,000 troops, one of Southeast Asia's largest armies.
The International Labour Organisation (ILO) has received 102 official complaints of under-age recruitment into the army since February 2007, it reported last month.
"What is happening now is that when the ILO [officials) come, they look for them [children] at the training school or at the army base," said Aye Myint.
He added that when investigating the disappearance of children thought to have been recruited by the army, some of them do not remerge at training schools but "go missing" and cannot be traced.
The claims of a private army would fit the profile of a notoriously reclusive and paranoid leader, who rarely meets with foreign dignitaries. Despite residing over the ruling State Peace and Development Council (SPDC) since 1992, his political future remains uncertain.
According to the Burmese constitution, the SPDC will be forced to cede power after the elections next year, but whether or not Than Shwe takes a backseat role in politics is unknown.
Reporting by Ahunt Phone Myat