Inspectors said "positive progress" is being made by Dudley Metropolitan Borough Council to improve support for looked-after children, since its children's services department was rated "inadequate" by the inspectorate in April 2016.
Improvements to training and better support for staff, including weekly senior manager briefings, are also praised by inspectors.
A reduction in caseloads for independent reviewing officers, enabling them to spend more time with children, is another area to improve, as are efforts to ensure the views of children are taken into account when considering long-term placements. This was particularly the case through children's attendance at fostering panels.
"There is a shared and determined commitment to improving services for children in Dudley," state inspectors in a letter to the council following their third visit since April 2016.
"Social workers and managers are very proud of their work. They speak highly of the vision of senior managers, who have established a culture of positivity and, most importantly, a culture of ‘can do and will do', in which the needs of children are paramount.
"The local authority knows that further improvement must be made to ensure that all children receive consistent and timely support. It is systematically and diligently addressing the actions in the improvement plan and this work is beginning to make a positive difference to children."
However, inspectors remain concerned that the council still relies too much on temporary social workers - while the use of agency staff has reduced in the past year, it is still high.
"This instability means that some children do not benefit from enduring relationships with their social workers," states the inspectors' letter to the council.
Further work is also needed to improve support for family or friends who take on caring responsibilities.
When Dudley was handed its inadequate rating, inspectors had been so concerned about the quality of child protection services that they referred 21 cases back to the council warning that immediate action was needed to ensure their safety.
A commissioner was appointed to oversee the children's services department due to the severity of Ofsted's concerns.
Despite this, last August, Education Secretary Justine Greening granted Dudley more time to improve before deciding whether its responsibility for children's services should be removed.