The threat remains that it could be closed and reopened (under the Government's Fresh Start scheme) with a new head, new staff and new governors. But the school has six months to prove it is on the road to success.
Merton officers recommended closing Watermeads even before inspectors had published the report of their return visit which found it failing.
The council argued the school had been in trouble for years - the original OFSTED inspection 18 months earlier found serious weaknesses and it still has large debts.
After pressure from parents - including Jan Hilson and David Stock, who wrote their own action plan to show they believed the school could be turned around - councillors agreed to consider a Fresh Start option instead.
Now even that option has been put on hold, and Merton's education committee has agreed not to pursue closure. Mr Stock now chairs the governors (all but two of the previous board members have gone) and a new acting head, former inspector Geoffrey Walker, is said to have brought fresh drive to the school.
Watermeads has had messages of support from around the country following an earlier article in The TES, and has appeared on television and radio.
Ms Hilson, also now a governor, said: "We've had letters of support from as far away as Plymouth. Some schools said they had been on special measures and were up for closure but they managed to get through it and so could we. You tend to get very isolated in situations like this - it's terrific to find you're not."
The new governing body is in the process of reorganising itself to be more effective. One key sub-committee will be charged with making links with the community and harnessing the enthusiasm that the threat of closure had unexpectedly generated. "We don't want to lose that again," Ms Hilson said.