After consulting with an expert panel including youth workers, the education watchdog said settings "need guidance about what works" to iron out inconsistencies in approach.
Safeguarding Children and Young People in Education from Knife Crime - Lessons from London, published this week, found that while schools have a duty to keep children safe, they do not have the ability to counter the complex societal problems behind the rise in knife crime.
These need to be addressed by a range of partners including the police, local authorities and policymakers, according to the report.
Ofsted's research, based on survey responses from more than 100 secondary schools, colleges and pupil referral units across London, looked at how children are protected from knife violence in school and tought to be safe outside, and aims to help provide a national focus for the way forward.
Just over half of the schools surveyed were aware their borough had a knife crime strategy.
Some schools shy away from methods that have been shown to work, due to fears around about sending the "wrong message" to parents, it suggests.
Measures being avoided may include searching pupils or following particular education programmes - which deter children from bringing weapons into school.
The study also examines how exclusions are being used when children bring knives into school.
While it is "extremely rare" that children are caught up in serious violence on school grounds, the study found that schools' valuable role in local partnerships is not being realised.
The report identifies inconsistent approaches to police involvement, with lack of clarity on when it is necessary.
Some children are therefore more likely to be criminalised potentially for the same actions, it says, and too often decisions are made on the basis of children's background, rather than the risk they pose to others.
The report goes on to say that no single body has a clear grasp of "managed moves", which involve moving pupils who carry knives to other mainstream schools or pupil referral units and calls for the DfE to collect data to help manage the situation.
A summary says: "It is difficult to know what happens to these children, whether they are kept safe or what their educational outcomes are."
While recognising the resource challenges facing local agencies, the report recommends that partners work together on early help services to prevent exclusions.
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Mike Sheridan, Ofsted's regional director for London, said that schools should be "fully involved in local knife crime strategies, but too few are brought around the table".
He added: "Schools work effectively to keep their pupils safe, but they can be isolated from each other and other agencies, leading to inconsistencies in the way schools approach this issue.
"It is clear that there is an overwhelming desire from different agencies to reduce the prevalence of knife crime.
"I hope that this insight into the issue through the eyes of school leaders will create momentum across London for a more co-ordinated approach to protecting vulnerable children from the dangers of knife violence."
In addition to the survey, Ofsted also undertook 28 in-depth interviews with school, college and PRU leaders and focus groups with children and the parents of children involved in knife crime.
The inspectorate consulted an expert panel made up of academics, charitable organisations, head teachers, parents, youth workers and ex-gang members.