Inspectors said there is little compelling evidence that headline-grabbing initiatives such as bringing sniffer dogs to school actually work and that they could have a negative impact on school life.
Ofsted's call comes just months after the Prime Minister gave his support to schools that have introduced such measures.
Tony Blair said: "If heads believe they have a problem in their school, then they should be able to do random drug-testing. They will have the power and the ability."
Despite the attention given to the problem, inspectors said most schools had no plans to introduce either sniffer dogs or random testing of children.
Ofsted's report, based on evidence from 260 primary and secondary schools, said teaching about drugs has improved since the inspectorate last carried out a survey in 1997.
However, one in 10 schools was still neglecting the issue and some teachers lack up-to-date specialist knowledge and have little understanding of pupils' needs, the report said.
In secondary schools, one in five lessons did not give pupils the opportunity to develop decision-making skills or help them to say no to drugs.
Achievement was unsatisfactory in one in 15 lessons and opportunities for pupils to explore their attitudes toward drugs were weak in one in six.
The number of primaries with a drug-education policy has doubled since 1997 to two-fifths. Teaching is good in four-fifths of lessons but school policies are often unsatisfactory or out-of-date.
Inspectors found that schools are concentrating too much on the threat from illegal drugs. However, pupils were more concerned about the dangers of alcohol and tobacco.
National surveys of young people's behaviour show about one in five secondary pupils admits having taken an illegal drug in the past year, with cannabis being the most popular.
Only 4 per cent said they had taken a Class A drug such as ecstasy, cocaine or heroin.
In contrast, one in 10 11-year-old girls and 16 per cent of boys admitted having had an alcoholic drink in the previous week. This figure rose to almost half of 15-year-olds. The average weekly?? consumption of secondary pupils was equivalent to almost five pints of beer or a bottle-and-a-half of wine.
Inspectors said that teachers were worried about challenging pupils over their alcohol consumption because parents had a relaxed attitude to drink.
David Bell, chief inspector, said: "Schools are doing a vital job of educating young people about the dangers of drugs, and take their role very seriously."
Drug Education in Schools is available from www.ofsted.gov.uk