The number of councils in England classed as top performers has risen, but weak local authorities are falling behind, the Audit Commission has said.
Councils in England performed well on recycling
In all, 79% of councils achieved the top three-star and four-star grades in the commission's annual assessment - a 9% improvement from last year.
But the watchdog said it feared the gap was growing between the best and worst.
Council services such as social care, housing and waste disposal are examined by the commission for the ratings.
They showed that one area in which England's councils have made big improvements is in recycling household waste.
None of the English local authorities performed below minimum environmental requirements last year, the Audit Commission said.
Sandwell, W Mids
Source: Audit Commission
And some 84% of councils were judged to be in the top two categories for environment services, compared to only 52% in 2005.
The report warns: "Better performing councils continue to improve to a greater degree than those in lower categories.
"Lower performing councils will need to accelerate the pace of improvement to prevent the gap between high and low performance widening further over time."
The warning of a possibly widening gap between the best and worst council performers came as the commission published results from its latest Comprehensive Performance Assessment, which uses a star rating system.
For the first time since the ratings were introduced in 2002, none of the 149 councils in England received zero stars, although five were left languishing on just one star.
Those authorities were Lambeth in South London, Rutland, Sandwell in the west Midlands, Stoke-on-Trent and Bristol. The overall improvements were welcomed by local government minister Phil Woolas who urged councils not to take their "foot off the gas".
Steve Robinson, chief executive of Stoke-on-Trent council said his authority's housing benefit service had improved greatly.
But he added: "There is one particular service that is failing and that is the service that we give to children and young people. I am confident that in the next three years we will see a significant improvement."
North East Lincolnshire, which received zero stars in 2005, had risen to two stars this time.