Its report, Improving Achievement in Gaelic, highlights the importance of extra-curricular activities in generating enthusiasm and interest.
Inspectors also found that better teaching resources were improving standards of learning and teaching.
Graham Donaldson, senior chief inspector, said: "Since our last look at this subject (11 years ago), there has been real progress. Pre-school and primary provision in particular have been improving in both quality and quantity . . .
"But, as ever, important issues remain. Secondary schools are not yet able to offer the range of subjects in Gaelic that is needed. There is a pressing need to train more appropriately qualified teachers; more could also be done to capitalise on existing secondary schoolteachers who could teach in Gaelic and technology-based approaches also offer potential to improve provision."
Mr Donaldson issued a stark warning on the need for further progress. "The 2001 census indicated an annual drop in the active Gaelic-speaking population in Scotland of about 1,000 per year. Last year there were 329 pupils in P1 Gaelic-medium classes.
"Even allowing for a contribution from Gaelic learning later in life, the implications of this imbalance are clear."
Meanwhile, a masterclass for Gaelic-medium teachers across Scotland to brush up their computer skills was held this week as part of a series of sessions in preparation for the virtual Gaelic secondary school.
The virtual school will use specialist centres to help students throughout Scotland continue their secondary studies in Gaelic.