Inspectors have praised standards at the six-pupil Skerries School in Shetland, which has twice fought off closure in the past three years.
HMIE regularly chides local authorities for failing to tackle over-provision but has now commended the quality of work in the four-pupil primary and two-pupil island secondary. It is staffed by a headteacher and primary teacher, backed by visiting specialists.
Denise Anderson, school board chair, whose four children constitute the primary department, said the nursery would reopen after Christmas and was optimistic that more families would arrive, with two houses on the market.
"The whole island has really picked up since the closures threats to the school. There is an atmosphere of happiness once again," Mrs Anderson said.
"We never thought for one minute that we would get a bad report, but it's really nice that the school has now been recognised. It shows that it was worth fighting to keep it open and that our bairns are not lacking in anything by being out here in Skerries."
Seventy people live on the island, which has been through a tumultuous period with the decline in fishing, the bankruptcy of its community-owned salmon farm and the closure of its fish processing factory.
Now the island's three whitefish boats are all working and three scallop vessels are catching shellfish for processing at the reopened factory. A new ferry has strengthened transport links.
Alex Jamieson, the council's education director, admitted in a newspaper article this week: "We have some very small schools on some very small islands and have no option but to keep them open as you cannot have pupils going off the island daily. They are hugely costly to keep but you cannot get round it."