Under the agreement, all schools will in future adopt the same starting age, provide parents with "plain English" report cards, require every pupil to participate in at least two hours of physical education each week and fly the Australian flag on their flagpoles.
Announcing the accord, federal education minister Brendan Nelson said the states and territories had accepted a record $10.8 billion (pound;4.7bn) over three years from the federal government to help fund their schools.
Dr Nelson said the money depended on a number of conditions being met and that the states had agreed.
"Funding will now flow immediately and students and parents can look forward to plain English report cards," he said. "Meaningless, jargon-filled reports will be a thing of the past."
National testing standards would be introduced in key subject areas and curriculum outcomes would become more consistent, Dr Nelson said.
"Parents will receive meaningful information to help them to make an informed decision when choosing a school for their child, with individual schools having to report on a range of performance indicators," he said.
Under the agreement, school principals will have a greater say in who teaches in their schools, as well as more control over school budgets and other management decisions.
"The explicit teaching of Australian values in schools, including requiring the flying of the Australian flag, will also be adopted," Dr Nelson said.
"Parents have a right to know how well their child is performing at school and that their schools are committed to nationally consistent, high standards."
Meanwhile, two Australian secondary schools have been selected to set up and operate the first technical colleges to be established by the federal government.
More than 200 technical and further education colleges are already operating across Australia but they are run by the state and territory governments. Prime minister John Howard announced before the federal election last October that his government would establish its own technical colleges if it won office.
Ringwood secondary college in Melbourne and St Joseph's vocational college in New South Wales were among 12 groups selected to set up the new technical colleges in 2006-7.
The government has committed $344 million (pound;149m) over four years to help create and operate the colleges in 24 regions across Australia.