Schools should incorporate racial equality into mainstream lessons to achieve an effective race relations policy, inspectors say.
Ofsted found some "creative" ways of promoting racial equality
Schools should "be creative" to close the attainment gap between ethnic groups, including by offering more support to under-achieving pupils.
The report, by Ofsted inspectors, says England's schools can achieve great benefits by forging community links.
And senior management should show that racism will not be tolerated, it says.
Strong guidance and definitions of what constitutes a racist incident is helpful to teachers, the report says.
Heads of schools which have achieved a successful racial equality framework view the policy as "mainstream concept and no longer a bolt-on in education", the report continues.
Schools should use the context of the local community as a teaching resource to learn about minority cultures and histories. Learning about racial equality could be used across the curriculum.
Groups and classes for parents may be a way to foster parental involvement in their children's attainment and improving their own prospects, the report says.
It commends a primary school which used guidance from another local authority which it found more appropriate to its circumstances, and another which tracked the behaviour and attainment of individual pupils from ethnic minority backgrounds and allocated resources according to its results.
Ofsted's research focused on improving standards and achievement and the response of schools and further education colleges to the Race Relations (Amendment) Act 2000.
The Act obliges schools to promote equality among pupils and "improve the educational experience of all groups".
The Department for Education and Skills guidance on race relations says schools should work to remove divisions and improve relationships between a school and its wider community.
Schools must report any racist incident to the local education authority, and reduce any disparity between the number of exclusions between different ethnic groups.
The Ofsted survey focused on 12 local education authorities and 50 schools in England considered to have effective policies.
The report said that the Iraq war was cited by some schools for an increase in racist incidents over the past two years.
A separate survey of 41 further education colleges found some were still failing to instigate change to improve racial equality.
The report said that promotion of good race relations throughout the curriculum was "patchy".
At management level, ethnic minority groups were still under-represented, the report said.
The further education lecturers' union Natfhe said it agreed with the conclusions of Ofsted's report.
Its equality official, Kate Heasman, said the union had been working in partnership with managements to get the Race Relations Amendment Act implemented in further education institutions.
"A lot of good work has been done some colleges must show greater regard for the policies and procedures set out in the Act to ensure that black and ethnic minority staff are treated fairly.
Ofsted director of education Miriam Rosen said: "The reports show what can be achieved when race issues are an integral part of the school and college curriculum.
"There is still work to be done but the signs are good.
"Children and young people need a chance to question, discuss and debate what can sometimes be difficult and contentious issues when they are at school or college."