The proportion of good and outstanding schools and childcare providers has increased since last year, but the report found "real concerns remain" about the quality of many services.
More than half of schools and childcare providers that were rated satisfactory previously failed to improve by their most recent inspection.
Chief inspector Christine Gilbert warned that raising the quality of satisfactory provision is the biggest challenge facing children's services.
She said: "I see no reason why every nursery, every school, college, children's home, all children's services and indeed, every provider, should not aspire to be good and to be working towards excellence."
She highlighted teaching as an area that needs particular attention.
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