He called for an end to the climate of "hostility and mistrust" between teachers and managers but underlined the importance of significant changes to teachers' conditions of service.
Mr Stephen said: "The teachers' associations are understandably sensitive to the real sense of mistrust and fear of change that exists in schools. I not only have to respect that concern, I understand it.
"Equally, however, it is clear that only if a substantive change in the underlying structure of terms and conditions can be achieved will the circumstances justify the major investment of resources which a settlement would demand.
"It is a very vital few weeks in Scottish education and there will be a final meeting of the McCrone group in early January. The future strength of Scottish education depends on a successful outcome," he said.
Mr Stephen believed all sides recognised that the 1980s inheritance of demarcated time and detailed definition of duties had to change. There was clear agreement that teachers needed a structure of continuous professinal development to allow skills and knowledge to be updated.
Management structures had also to be simplified and made more responsive, as teachers were burdened by administrative duties others could more easily carry out, the minister continued.
But Mr Stephen emphasised the new approach of the Scottish Executive in key areas, including the national priorities. "We have deliberately moved away from a prescriptive and target-driven approach to the national priorities. In doing so, we have responded to some of the key voices raised during the consultation process," he said.
Mr Stephen backed effective measurement and rigorous performance monitoring but measures could not "simply be imposed in a standard centralised format".
"We are committed to developing performance measures within the framework of the national priorities through a participative process which draws on the experience and expertise of those who know and who matter - those engaged in the delivery of education," Mr Stephen said.
He pledged a continuing "valued and absolutely vital role" for local authorities in education. However, delegation to schools had to become more effective.