Documents released by the National Archives show how the Prime Minister warned that telling teenagers about the dangers of "risky sex" could backfire and cause "immense harm".
She backed down after advisers and ministers warned hundreds of thousands could be infected by the Aids virus if they failed to change their lifestyles.
In 1986 - five years after the UK's first case was recorded - awareness of the disease was increasing.
But Mrs Thatcher was not keen on health secretary Norman Fowler's plan for a newspaper campaign with advice on "safe sex".
She scrawled in a note: "Do we have to do the section on risky sex? I should have thought it could do immense harm if young teenagers were to read it.
"I think the anxiety on the part of parents and many teenagers who would never be in danger from Aids, exceeds the good it may do... adverts where every young person will read and hear of practices they never knew about will do harm."
Mr Fowler insisted that unless the advice was included - particularly in relation to gay men - the advert would lose "all its medical authority and credibility."
When deputy prime minister William Whitelaw told her there was no support for her objections among other ministers she was forced to back down.
She also objected - but later gave in - to Mr Fowler's suggestion of following up the adverts with information leaflets sent to every home in the country.
The cabinet secretary, Sir Robert Armstrong, warned her: "If there is no change in habits and practices, particularly but not exclusively among those currently most at risk (homosexual and bisexual men and drug misusers), there could at the end of five years be half a million infected carriers of whom a substantial number would subsequently develop the disease; and that is a sober estimate."
Bernard Ingham, her trusted press secretary, added: "There is certainly a feeling abroad that the Government is doing too little and is not treating the issue with sufficient urgency.
"There is also a feeling that the Prime Minister is acting as a brake on educational publicity."
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