Asked to examine why black pupils are three times more likely to be excluded, a senior Department for Education and Skills official concluded that "largely unwitting" racial discrimination was to blame.
"A compelling case can be made for institutional racism in schools," according to the report by Peter Wanless, director of school performance, leaked to the Independent on Sunday.
But this week Mick Brookes, National Association of Head Teachers' general secretary, hit back: "Behaviour that disrupts the education of others must always be acted upon. Where there is an external culture of violence, anarchy and lack of respect for authority, that clash of cultures poses a huge problem for our schools."
The Wanless report, "Getting it. Getting it Right", backs those who believe it is decisions taken by schools rather than the behaviour of black pupils, that leads to the huge disparity in exclusions.
Ministers were left to decide whether the term "institutional racism" should actually be used. But a DfES spokesman said they believed it would be inaccurate and counterproductive.
Many experts disagree. Professor David Gillborn from London university's Institute of Education warned of institutional racism in schools as far back as 1999. "The evidence suggests very little has changed," he said.
"Most schools have done little more than download a policy from the internet and add their name to it."
In 2005, Canterbury Christ Church academics found some schools institutionally racist due to disproportionate exclusion rates. And as chief inspector in 2004, David Bell, now the DfES's top official, warned that councils were failing to combat racism in schools.
The latest DfES report recommends a campaign to address how schools treat black children and more robust support from Ofsted in changing the attitudes of the 20 worst performing authorities and 100 worst performing schools.