Ten thousand children are missing from the education system and many others are receiving an "unacceptable" level of support, a report by inspectors has found.
Local authorities fail to keep track of children not attending school and do not provide the services needed to tackle disaffection and underachievement, according to the Office for Standards in Education.
David Bell, the chief inspector, said: "The level of support offered to children missing from school is unacceptable and is reinforcing the disadvantages they already face through social exclusion.
"Local authorities must do more if we are to prevent even more children from becoming disaffected and being lost from the system."
More than 9,000 pupils are excluded from school each year and up to 10,000 are lost to the system, official figures show. An average of one in 11 pupils is off school at any one time and some 15 to 16-year-olds skip up to a fifth of school.
Ofsted looked at data collection, planning and services in 10 local authorities between September 2003 and April 2004. It found that the sharing of information among services and agencies is still in its infancy.
"While some schools and LEAs are relentlessly focused on keeping track of the most vulnerable pupils, others are content with minimal oversight which ceases once the pupils have moved beyond immediate contact," the report said.
"Some schools seem largely unaware of what happens to a pupil once he or she has been taken off the roll and demonstrate little understanding of their responsibilities for the pupil's care and welfare."
One school, not named, did not know the destination of three-quarters of the children taken off its roll.
The report said that LEAs need to keep an up-to-date database of all children educated other than at school, which indicates their specific needs. They also need to extend relationships with other agencies to help improve behaviour, tackle bullying and reduce exclusions from schools.
It said schools and LEAs need to analyse the reasons for poor behaviour and exclusions, particularly among vulnerable groups. They should also make more use of the information gathered during truancy sweeps and make sure they are followed up.
Out of school: a survey of the educational support and provision for pupils not in school was published alongside a separate Ofsted report on the Children's Fund.
This found the second wave of projects to tackle social exclusion among five to 13-year-olds had led to noticeable improvements for children.
The Children's Fund was introduced in 2001 to bring together public and voluntary bodies to tackle social exclusion.
Funding for the first three years was pound;380 million in total.