Overall standards in schools in Wales are continuing to improve, according to the annual report by the schools inspection body, Estyn.
Chief inspector Susan Lewis reports 81% of seven-year-olds reached at least level two - the level expected of them - in English or Welsh, maths or science.
But Welsh-medium education was becoming a victim of its own success, she said.
Maths and science results for 11 to 14-year-olds were disappointing.
The report found 72% of lessons in primary and secondary schools were given the two top grades by inspectors and generally there has been a steady improvement in the standards achieved by pupils.
However, maths results did not improve and science results were not as good as last year for Key Stage 3, 11-14-year-olds.
The number of children gaining five GCSEs at C and above has only increased very slightly.
At A-level, the percentage of students gaining two or more grades A to C as well as the percentage gaining two or more grades A to E was slightly lower than 2004.
The Welsh-medium sector was showing signs that children from more diverse backgrounds were moving into the sector.
Top grades for 72% of primary and secondary lessons
Problems with maths and science at Key Stage 3
40% primary school buildings in a poor repair
Cutting surplus places could close 275 average primary and 26 secondary schools
The popularity of Welsh-medium schools in non-Welsh speaking areas has increased to the extent that standards in Welsh as a first language were rated as good or very good in 60% of lessons - lower than in any other subject.
In Welsh-speaking north and west Wales, many teachers were finding it difficult to change the way they taught to meet the needs of these new groups of pupils, the report said.
Turning to disciplinary matters, schools were slowly reducing the number of pupils they excluded permanently by excluding them for shorter periods instead.
The quality of school accommodation continued to be a matter of concern. Four in every 10 primary schools had shortcomings in their accommodation.
In many cases, the report found, local education authorities had been slow to take steps to reduce the number of spare or unfilled places.
The report said if it were possible to reduce the number of schools in Wales to match exactly the number of pupils who need places, LEAs across Wales could close 275 average primary schools (17% of the total) and 26 average-sized secondary schools (11%).
In further education, too many people were failing to complete courses, the report found, while the strongest criticism was reserved for work-based training, claiming nearly a third of course providers had shortcomings.
Heledd Hayes, of teaching union NUT Cymru, said teachers regarded the Estyn report as an important indication of the state of the Welsh education system.
She added: "It is significant because it gives us an overall impression of what is happening in Wales in general.
"Not individual children but the standards of achievement and any problems or successes throughout Wales."