The inspectorate praised the London Borough of Bexley for its new approach to partnership working between agencies, which it said has created a whole-system approach where all partner agencies are committed to "building the safety network around children and families".
Examples of this partnership working include the specialist child and adolescent mental health service for looked-after children that ensures young people never wait more than eight weeks for an initial consultation.
The inspectorate also praised the council's focus on early help, attention to children's views, and how its manageable social worker caseloads are enabling creative direct work with children and families.
The judgment represents a major turnaround for the council after it was rated as requires improvement in 2014. Shortly after, it appointed former senior Ofsted official Jacky Tiotto as director of children's services.
The Ofsted report states: "A relentless focus on providing early support results in a high number of families receiving the right level of help at the right time, with fewer families needing statutory intervention.
"Creative direct work and consistently good and high-quality assessments are undertaken by a skilled, stable and well-supported workforce. These lead to dynamic and proportionate plans and interventions.
"Children's views routinely inform assessments, support and safety plans. This makes a positive difference to improving their circumstances."
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Other activities of outstanding practice highlighted by Ofsted include:
- An underpinning ethos that children should grow up in their own families when it is safe to do so
- The appointment of a specialist domestic abuse social worker to ensure appropriate support is rapidly put in place
- Giving families practical help with housing and benefit applications, as well as emotional support
- Offering children who go missing the chance to talk to a trusted adult they already know
- Better than average educational outcomes for children in care
Tiotto said: "I would like to thank all our practitioners, managers and leaders who come to work every day to try and make a difference to someone's life.
"I know they are so proud of this inspection result and I hope each and every one of them stays with us, so we can continue to do all we can to help children, their families and carers to enjoy their lives together.
"There is a special thank you I must make to the director of children's services in Essex, Helen Lincoln, who has supported and guided me over the three years we have been working to be the best we can."
Ofsted said the council could improve further by creating a single system for recording and holding all return home interviews and improving pathway planning for care leavers.
It also said the borough needs to increase the number of children in long-term foster care with comprehensive records of their early childhood experiences.