Ofsted said Islamia girls' high school was particularly good at teaching pupils about other religions and about British culture and public institutions.
The inspectors' findings come four months after David Bell, chief inspector, caused a political storm by accusing Muslim independent schools of threatening social cohesion by failing to teach pupils tolerance of other cultures.
Mr Bell was condemned by Islamic groups and it later emerged that Muslim schools performed better in this respect than their Christian counterparts.
Islamia girls' high was set up in 1984 and charges fees of pound;750 per year.
It encourages children to discuss issues such as proportional representation and low voter turn-out during citizenship lessons.
Professionals from the judicial system and the National Health Service visit the school to talk about their work.
Islamic studies lessons give pupils the chance to learn about issues such as euthanasia, the Holocaust and slavery.
Inspectors were impressed by the school's provision for cultural education and preparation for life in a multi-cultural society.
"When debating the moral and spiritual issues surrounding euthanasia, pupils showed a sensitive appreciation of Christian points of view as well as those of Islam."
Ofsted praised the quality of teaching and said the school was "a happy, caring community based on mutual respect and outstanding commitment to a good quality education".
The TES could not reach the school for comment as its phone lines had been disconnected. The Association of Muslim Schools said this was likely to be the result of a dispute with a local mosque which owns the school's premises.