But thousands of childcare providers are breaching national standards by failing to safeguard children's health, employing inappropriate staff or doing too little to prevent accidents.
More than a third of childcare providers failing to meet one or more of 14 national standards have been ordered to improve.
Ofsted said providers needed to improve fire safety precautions and put in place clear procedures to deal with allegations of abuse or if parents fail to collect their child .
Standards of behaviour, premises, equipment and activities to develop children's intellectual and social well-being were judged to be good in two thirds of the 94,000 childcare providers inspected.
Full-day care and sessional day care was rated better than other types of care such as childminding. But the Early Years annual report showed one in 20 providers failed to meet national requirement to promote children's health and prevent the spread of infections.
One in 25 failed to promote safety and prevent accidents and one in 30 failed to follow proper child protection procedures. In addition, 7 per cent failed to ensure only suitable adults looked after children and 5 per cent had too many children per qualified adult.
Maurice Smith, Ofsted's director of early years, promised inspectors would continue to pursue "the very small minority of cases where providers did not deliver the standards children deserve.
"We want good practice to be common practice. This report has shown that substantial numbers of children receive good-quality care and education but there is still further to go."
Overall, only 1 per cent of childcare providers were judged to be unsatisfactory.
The report is accompanied by the launch of local authority early years profiles which show how the amount and quality of childcare in each council area compares to the national average.
David Bell, the chief inspector, said: "There is some truly inspirational work going on in nurseries and the homes of childminders. We have tried to capture a small picture of it in today's report. Parents can be assured that the vast majority of childcare providers in this country are doing a good job in keeping children safe and preparing them for life at their 'big school'."
Early Years: Firm Foundations is available from www.ofsted.gov.uk