Lesbian and gay teachers are overlooked for promotion and bullied by both pupils and colleagues, according to a report published by the Department for Education and Skills.
Homophobia is rife in many schools, with little being done to protect pupils and staff from abuse, research from London university's institute of education found.
Incidents ranged from the use of inappropriate language to serious physical violence.
The report described a culture of denial with many schools and teachers unwilling to confront the issue for fear of antagonising parents.
Homosexual teachers whose classes are disrupted by pupils often cannot rely on other staff for help.
"Colleagues and school leaders may provide little support in protecting teachers from homophobic incidents - or even contribute to these, resulting in stress, lack of confidence, poor work achievements, being overlooked for promotions and resignations," the report said.
It estimated that there were more than 17,000 gay, lesbian and bisexual staff in schools.
Schools, particularly faith schools, and staff themselves are wary of being open about this because they fear parents' reaction.
This is despite the fact that one survey found that three-quarters of parents said they would feel comfortable if their child's teacher was homosexual.
The study is based on a review of research published since 1997 and interviews with representatives from 28 key organisations including voluntary groups, unions, the DfES and the Office for Standards in Education.
It estimated that about 3 per cent of pupils in England - 125,000 - are attracted to people of the same sex.
Homophobic remarks are the "insult of choice" in some playgrounds, with some boys developing homophobic attitudes in order to gain credibility with their peers.
Homosexual boys are more likely to suffer physical violence while girls are commonly ignored by their friends.
More than half of adult lesbians and gay men have considered harming themselves as a result of being bullied at school and two in five have actually done so or attempted to do so at least once.
Two-thirds of gay pupils truant from school to avoid abuse.
It is not only gay and lesbian pupils who suffer abuse. Sporty girls can be labelled lesbians and may lose boyfriends who want to be seen to be going out with a "proper" girl, the report said.
The report called on schools to adopt explicit policies to tackle homophobia and to challenge unhelpful stereotypes of homosexuals.
Government guidance states "teachers should be able to deal honestly and sensitively with sexual orientation, answer appropriate questions and offer support".
But the study found too many schools are guilty of "heterosexism", assuming everyone at the school is heterosexual, leaving victims of homophobia feeling isolated and without any support.
Many teachers are unaware that Section 28, a law banning the promotion of homosexuality by local authorities, has been repealed.
The report said: "The broad idea that we need to address bullying does not actually get you very far, since it does not challenge the perception that there is no one within the school who is lesbian, gay or bisexual but they are elsewhere."
Homophobia, sexual orientation and schools: a review and implications for action by Ian Warwick, Elaine Chase and Peter Aggleton, of London university's institute of education, is available at www.dfes.gov.ukresearch