Inspectors have found little difference between mainstream and special schools in the quality of provision for English pupils with special educational needs.
Ofsted says mainstream schools with special units are very effective
A report by Ofsted said pupils were equally likely to make good progress in both types of school.
But its authors said pupils had the best chance of progressing in mainstream schools with special units.
Pupils with social, emotional and behavioural problems received "too little help too late", inspectors said.
Inspectors drawing up the report - Inclusion: Does it matter where pupils are taught? - visited 74 special schools, mainstream schools, mainstream schools with specialist units, and pupil referral units.
Maurice Smith: Inclusion debate must focus on quality of provision
They found the most important factor in determining the best outcomes for pupils - socially, academically and personally - was not the setting, but rather the "quality of the provision".
Of the institutions inspected, pupil referral units were the least effective in helping pupils in the three specific areas.
Inspectors criticised mainstream schools for relying too heavily on teaching assistants to support SEN pupils, saying experienced specialist teachers were more effective.
There was also concern about the "complex" process of issuing pupils with a statement of SEN, one which especially let down those pupils with behavioural, emotional and social difficulties.
Ofsted called on the Department for Education and Skills to work more closely with other government departments to clarify what is meant by "good progress".
And the Training and Development Agency must ensure teachers receive more training on issues relating to pupils with learning difficulties and disabilities, inspectors said.
The Ofsted report is published a week after the Commons education select committee said education for pupils with special needs was "not fit for purpose".
The findings are likely to fuel the controversial debate over whether SEN pupils should be included in mainstream schools.
In May, a professor of education said including children with special educational needs in mainstream classrooms could be "a form of abuse". John MacBeath of Cambridge University said there was concern as to whether schools could provide a suitable education for those with complex needs.
Quality over setting
The chief inspector, Maurice Smith, said: "Pupils with even the most severe and complex needs can make outstanding progress in all types of settings.
"The inclusion debate has for too long focused on whether children with learning difficulties and disabilities should be educated in special schools or mainstream schools rather than the quality of the education and support they receive."
Mr Smith said those pupils with behavioural problems were losing out in the complex procedures for obtaining an SEN statement.
"Pupils with behavioural, emotional and social difficulties receive too little support too late," he said.
"Although statements are effective in identifying the educational needs of pupils the system can be cumbersome and bureaucratic."
Schools Minister Andrew Adonis said: "We are not complacent and we know there is more to do.
"The areas the report identifies as needing further work are priorities for us, and we will address these in our response to the Education and Skills Select Committee report into SEN later this year.
"This government continues to make special educational needs a priority - which is why we have increased local authorities' budgeted expenditure on SEN from £2.8bn in 2001-02 to £4.1bn in 2005-06 and an estimated £4.5bn in 2006-07."
The shadow education secretary, David Willetts, accused the government of "trying to drive children with special educational needs headlong into mainstream education".
"But this is a much more balanced report which shows that many special schools do an excellent job.
"It is not inclusion that matters, but the quality and training of teachers and the wider educational environment. This is another reason why the government should stop its headlong rush into inclusion."
Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers, said: "We agree with Ofsted that it is the quality of provision, rather than the type of school, that matters in the education of pupils with learning difficulties and disabilities."
But she said mainstream schools must be "sufficiently resourced to increase specialist teaching and support".