The review of Dundee College concluded that learners are progressing well, with above average levels of student achievement in both advanced and non-advanced courses. The college was also judged to be well managed with very effective leadership.
The learning and teaching process was judged to be "very good" in six of the seven subject areas evaluated and "good" in one area. Learner progress and outcomes was "very good" in five subject areas and "good" in the remaining two areas.
In the cross-college elements, there were six "very good" grades and one "good" grade.
Roger McClure, chief executive of the Scottish Further Education Funding Council, said: "It shows that the college is doing an excellent job for its students and community. Of particular note is their sector-leading and innovative practice in business, management and administration and in special programmes for young people who find it difficult to engage in education and training."
In 2000, when the council asked inspectors to introduce a more rigorous quality assurance system, Dundee was one of the first to be reviewed. Its inspection report, published in 2001, set a standard for others to reach.
A spokesman for Dundee College said that the latest HMIE report had shown that Dundee had again raised the upper benchmark for other colleges.
Iain Ovens, Dundee's principal, commented: "We must have set some kind of record with 81 per cent of our grades being in the top category and the rest in the second top. The review team did not discover a single issue that required further scrutiny.
"Our success is due to an enormous amount of work by staff from all parts of the college. In particular, we were commended for the way in which teaching and support staff work together at all levels to look after their students."
While the report praised the college for the excellence of its computing facilities and accommodation in many areas, concern was expressed about the limited access available for users with disabilities at the Graham Street campus.
The report, however, recognised that this was being addressed. The college plans to dispose of three of its present campuses, including Graham Street, and rationalise its estate by 2008 on two sites.
Mr Ovens said: "Our move to a 21st century estate will ensure that Dundee College continues to lead the way in quality of service and realises its potential to contribute even more to the local and national economy."