Ofsted inspectors found that although there were no widespread or serious failures that leave children at risk of harm, the authority is not delivering good care for all looked-after children and young people.
The report is the fifth to be published under Ofsted's single inspection framework, which was introduced in November.
The authority's rating comes despite it being judged good in three areas - child protection work, experience and progress of care leavers, and leadership, management and governance.
However, it was given an overall "requires improvement" grade because performance on adoptions and elements of work with looked-after children were not deemed to meet the same standard.
Inspectors said weaknesses included:
- There not being enough approved local adopters for all children waiting for adoption
- Some plans for looked-after children and young people were unclear
- Feedback from complaints was not used effectively to improve services
- Educational progress for looked-after children was not good enough
- Child protection plans did not always clearly set out concerns
However, the report does state that council leaders are making a "positive difference" to the lives of children, young people and families, and have improved the quality of services.
It adds that the authority has changed the way it works over the past 18 months, resulting in more children in need of help and protection getting the support they require.
A previous inspection of safeguarding and looked-after children services at the authority, published in November 2010, rated each area as adequate.
Jackie Drayton, Sheffield City Council's lead member for children, young people and families, said the latest report shows Sheffield children and young people are well supported.
"There are no widespread or serious failures in any of our services," she said.
"We already have plans in place to address the issues that the inspectors raised, where we have been assessed as requiring some improvement to be good in two areas."
Drayton added that she was disappointed with the criticism of adoption timelines.
"We take our family finding for adoption very seriously, indeed we do not give up on finding children adoptive placements," she said.
"What we pride ourselves on is getting the right families for children, something which the inspectors have actually praised us for, sometimes with particular children this takes longer but it's vital to get it right.
"The last thing anyone would want is a child being placed with the wrong family only to suffer the heartbreak of this crucial relationship breaking down just because of pressures to make sure deadlines are reached."
Sheffield's report is the last of the first tranche of five to be published by Ofsted.