Aycliffe Secure Centre, run by Durham County Council, received the improved judgment on its previous two ratings of "good".
The centre, which supports up to 38 young people aged 10 to 18, was awarded the top rating in all areas, including how well residents are helped and protected, effectiveness of leaders and managers, and outcomes in education and learning activities.
The report states: "The children's home provides highly effective services that consistently exceed the standards of good.
"The actions of the children's home contribute to significantly improved outcomes and positive experiences for children and young people who need help, protection and care."
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