Confidential documents obtained by teachers show that Chris Woodhead, the former chief inspector of schools, decided to fail their London school against the advice of senior inspectors.
Islington Green school was told it would be put into special measures the day after Labour swept to power in May 1997. The decision was confirmed later that year by Mr Woodhead after an HMI team was sent in to double-check.
Staff, who used the new Freedom of Information Act to obtain documents relating to the HMI visit more than seven years ago, discovered that senior inspectors argued against failing the school.
A confidential letter from Barry Jones, an HMI, to Mr Woodhead in November 1997 expresses surprise that he had placed the school in special measures.
At the time it had the second-best GCSE results in the borough and had appeared in a league-table of the top 100 schools in England for value-added results.
"As with all inner-city schools it had a number of clearly identifiable weaknesses," Mr Jones wrote. "However, the HMI team were of the unanimous view that the school was not failing."
The HMI letter was obtained by Ken Muller, the school's National Union of Teachers' representative. "Everyone at Islington Green was devastated when it was placed in special measures. Good teachers left and the GCSE passes halved."
Mr Woodhead said he could not remember details of the case. "It was my responsibility then as chief inspector to come to a personal decision on whether I should endorse the views of HMI or not. Normally I did, but there were occasions when I didn't."