Black pupils in England are three times more likely to be excluded from school because of "systematic racial discrimination", according to a report.
Suggestions of 'institutional racism' have been rejected by ministers
The Department for Education report, leaked to the Independent on Sunday, says the bias is "largely unwitting".
Ministers have rejected any suggestions that schools are institutionally racist as "inaccurate and counterproductive".
Latest GCSE results show black pupils continue to lag behind their classmates but some have been narrowing the gap.
The report, led by the director of school performance and reform Peter Wanless, was ordered by the government last year - there is as yet no publishing date for it.
Called Getting it. Getting it right, it found: "The exclusions gap is caused by largely unwitting, but systematic racial discrimination in the application of disciplinary and exclusions policies."
It states that a "compelling case" can be made for the existence of institutional racism in schools.
But it stops short of insisting that this term be used - leaving the final judgement with the minister.
"If we choose to use the term 'institutional racism', we need to be sensitive to the likely reception by schools [but] if we choose not to use the term, we need to make sure the tone of our message remains sufficiently challenging."
The Department for Education and Skills said that ministers had concluded that it would be inaccurate and counterproductive to brand the school system racist.
A spokesman said: "However, there is more that schools, parents and the government can do to ensure that every child fulfils their potential whatever their background."
An Ofsted report in 1999 warned that many schools are "institutionally racist", citing evidence that Pakistani, Bangladeshi, Black Caribbean and traveller children were failing to make adequate progress.
The latest report was conducted in about 100 schools in 20 local authorities.
Teachers' union The National Association of Head Teachers said this small sample size did not give any credence to England's schools being institutionally racist.
General secretary Mick Brookes said it was "an indictment of the exemplary good practice" in the majority of schools.
Shadow education secretary David Willetts said the evidence was "clear" that Afro-Caribbean boys in particular under perform at school and are more likely to be excluded.
But he added: "Labelling our schools 'institutionally racist' doesn't help.
"We should be focusing on raising educational standards and tackling truancy - not throwing around allegations of racism."
Latest GCSE figures show just over 44% of black Caribbean pupils gained five good GCSEs in 2006 compared with an average 56.9% of pupils.
But some are narrowing the gap - the girls from black African backgrounds did better than white boys: 56.1% getting five good GCSEs compared with 52.6%.
The proportion of white girls doing that well was 62%.