Specialist sports colleges need to do better at identifying and nurturing the Olympic stars of the future, inspectors said this week.
Government efforts to improve services for talented pupils will have limited impact until more is done to tailor PE lessons to the their needs, according to the Office for Standards in Education.
It said the curriculum was often organised in a way that left little opportunity for identifying potential stars and helping them develop their skills.
Schools were good at picking out top performers but too many under-achieving but talented pupils slipped through the net, said inspectors.
Government guidance on how to identify talented pupils so they reached school, county or national standard, was "not yet working as well as might be expected".
Ofsted recommended its replacement by a system which encourages teachers to look for generic characteristics of talented pupils, such as spatial awareness and the ability to make decisions under pressure.
David Bell, chief inspector, said: "The start of the Olympics highlights how important it is to ensure that youngsters with a special talent for sport are given every opportunity to realise their potential through PE and school sport."
The report is based on the findings from 39 sports colleges taking part in the Government's Physical Education, School Sport and Club Links programme.
Since September 2003, the scheme has included support for gifted and talented pupils.
Inspectors found that although it was too early to judge the overall impact of the programme on the performance, motivation and self-esteem of talented pupils, some were already benefiting.
Management and leadership was rated as good or better in more than half of schools and two-thirds of schools have developed extensive links with clubs and other community providers.
Good schools also had mentors to help talented pupils balance the competing pressures of schoolwork and training.
Don Foster, Liberal Democrat sports spokesman, said the report showed the need to change the way PE was taught in schools. His party, if in power, would give pupils the chance to try up to 20 different sports by changing the way PE teachers work. PE teachers would be experts in one or two sports and would take lessons in many schools in an area.
"Provision for gifted and talented pupils in physical education" is available at www.ofsted.gov.uk