The Audit Commision praised the impact of the Highcross centre
A detailed report has praised Leicester for its regeneration but criticises it for weaknesses in the schools system.
The Audit Commission study gave Leicester City Council two out of three stars and an overall "good" ranking.
The multi-million pound regeneration of the city was praised, but concerns were raised about wider value for money and educational standards.
The council said it was pleased with the results but admitted there was room for improvement in some areas.
Most of the credit was given for the work done transforming the look and feel of the city centre with the Highcross Shopping complex, the Curve theatre and surrounding cultural quarter.
Mary Perry, Audit Commission senior manager, said: "Leicester city centre has been improved substantially by the council and its partners.
"The new theatre, shops areas and jobs have made it a city centre to be proud of.
"However if Leicester is to thrive, more action is still needed to improve educational attainment and skill levels and to help people to get work, as well as to build and sustain new businesses."
The commission used recent Ofsted reports to assess educational provision.
City councillor Patrick Kitterick, who has overseen the regeneration project, said they were willing to take the bad with the good.
"It is not just the Audit Commission, I think the people of Leicester are the real test and if you ask them most will say the transformation of the city centre has been amazing."
But he added: "We need to do more work in our communities in a recession and we are setting up access in the most deprived parts of the city centre to get people into employment in these tough times."
The local branch of the National Union of Teachers said the report was already out of date and many innovations were already in place.