Watership Down by Richard Adams
Right, let's get this over with, shall we? This book is about migrating rabbits. I cannot tell you how skeptical I was upon starting it, but as it turns out, Watership Down is completely deserving of its classic status and besides that, it is awesome. Not sure it's 'underrated', per se, more like 'misunderstood' or shied away from.
The Cry of the Icemark by Stuart Hill
Fifteen year old Thirrin suddenly finds herself Queen of the Icemark, a tiny snowbound country which is marked to be invaded by the all-powerful Empire and their calculating General Scipio. This one's an old favorite, and there are two sequels, both equally good.
The Monstrumologist by Rick Yancey
I recently read that the Monstrumologist series is being discontinued by Simon & Schuster due to poor sells. This officially sucks. These books are like YA Victorian Gothics-- so gory and great. Plus, the first book won a Printz Honor Award! How can they discontinue this series?-- come on!
The Jungle Book by Rudyard Kipling
I know what you're thinking: 'What, you mean one of the most famous books of all time?' Yes. I included The Jungle Book because of all how many people have seen the Disney movie and think they know the story. But... Kaa is not evil; only a few of the stories are about Mowgli, who does not in fact sing and dance with Baloo. This book is too awesome to be missed-- I confess I just read it for the first time recently, and wish I'd read it sooner.
Godchild series by Kaori Yuki
An underrated manga series. Seriously, they've yet to even make an anime out of it. (Now, that's underrated, considering all the horrible mangas which are made into anime.) Teenage Victorian nobleman Cain studies poisons and solves eerie mysteries, many of which regard his own shadowy past, in a crime-ridden London.
Midnight for Charlie Bone by Jenny Nimmo
British author Jenny Nimmo's books are most popular with younger children, but I think teens and adults would also love this series. It's somewhat like Harry Potter, yet somehow manages to elude comparison.
Gone by Michael Grant
Pinky and I (that's my elusive little sister, for those who don't know) have featured the Gone series on the blog before. It's an awesome dystopian series, Lord of the Flies-esque with a modern twist and a fast-paced, action-packed writing style. Seriously, the most addictive series ever.
The Eagle of the Ninth by Rosemary Sutcliff
A great historical fiction book, first of a series. These books are from the fifties, but gained a bit of attention after the release of The Eagle as a movie. Still fairly little-known.
Epic by Conor Kostick
The world is a fantasy MMORPG in this fantastic sci-fi book. I think it was popular in Ireland, but never very much in the US.
The Tree Shepard's Daughter by Gillian Summers
I loved this, the first in a series about a girl who goes to live with her father, who travels with a Renaissance Faire, after her mother's death. Surprisingly great, though I don't really like the cover. The Ren Faire setting is really fun.