The Excellence in Cities (EiC) programme was criticised last week after a government-commissioned evaluation by the National Foundation for Educational Research found there was no evidence it improved GCSE grades in English and science.
But an Ofsted report today said the pound;386 million scheme was highly successful and had contributed to a steady improvement in GCSE results.
Schools increased the proportion of pupils who gained five A* to C grades by 5.2 percentage points over the past three years, narrowing the gap with other schools from 10.4 to 7.8 points.
Inspectors said the EiC initiative had improved social inclusion and standards in England's poorest areas since its launch in 1999.
In eight out of 10 EiC schools visited, the leadership and management were highly effective and heads made the most of their extra money, an average of pound;120 per pupil a year. But improvements had been hampered in a few schools because of weak leadership and poor co-ordination.
The Ofsted report, based on visits in the autumn of 2004 and spring of 2005, was more positive than the NFER study, which tracked the EiC scheme up to 2003. The Department for Education and Skills said the NFER's findings were "out of date" and the EiC was an "indisputable success".
EiC: managing associated initiatives to improve standards is at www.ofsted.gov.uk EiC: the national evaluation is at www.dfes.gov.uk.