Reports due out in the next few weeks are expected to condemn education services in the north London borough, once home to Tony Blair, and Liverpool.
Council officials expect inspectors to criticise the quality of services to schools and to suggest results are not value for money.
The decision by ministers to privatise the school improvement service in Hackney, east London, has led to speculation that the two councils may suffer a similar fate.
Political interest in Islington's future is likely to be high. The Prime Minister chose not to send his son to the local comprehensive and education minister Margaret Hodge was leader of the council when it took over education nine years ago.
Islington's chief executive, Leisha Fullick, said education had been a long-standing problem in the borough. "Standards in the schools were too low when it was a division of the Inner London Education Authority. Islington has not done enough, but we are seeking a partnership with the community.
"We know OFSTED will be critical of some of our services, but we know what the problems are and the way they will be tackled."
The overhaul of services is already underway with the new director, Andrew Roberts, drafting plans to take policy-making away from local councillors.
Mr Roberts says standards in Islington are worse than in comparable areas of London - schools results actually fell last year. Primary schools, in particular, he says, have been neglected because priority was given to improving GCSE results.
The education committee, he says, has not always appeared to understand its role and members have frequently and publicly been critical of the education service.
Mr Roberts wants to abolish the committee and for policy to be decided by a forum of schools, parents, councillors and businesses.
The intention is to apply the principles of an education action zone right across the borough. The Government has already told Islington it would be unlikely to support a borough-wide zone.
The local authority would remain responsible for services, but legal advice is being taken as to whether such duties can be delegated to a partnership.
The package may not be enough to convince ministers that Islington can transform its services.
Mr Roberts points out that in 1988 the authority had seven failing schools (where one might have been expected in an authority of its size) and eight schools with serious weaknesses. Some 27 schools were running deficit budgets.