Pupils moving from primary to secondary school are benefiting from closer school links and new teaching methods - but more needs to be done, according to the inspection agency Estyn.
It has assessed the Assembly government's KS3 strategy, Aiming for Excellence. The guidance, drawn up in 2002, aimed to improve the continuity of education from primary to secondary school.
Estyn says it has made a "significant contribution" to improved teaching and learning, but concedes that LEAs and schools have used several methods, making it "difficult to identify any one initiative as being directly responsible".
Estyn found the management of transition is improving and more families of primary and secondary schools are working together, visiting each other's schools, developing bridging units in particular subjects, and jointly moderating teachers' assessments.
Overall, said Estyn, schools use information about pupils' prior achievements more effectively, particularly when planning for pupils with special educational needs. At KS2 and KS3, teachers are better at developing and applying literacy and numeracy skills in subjects across the curriculum "but there is still much to do", say the inspectors.
There has been slow progress in the use of assessment. Too many pupils do not understand assessment criteria and what they need to learn next in order to improve. And some secondary-school teachers still do not know enough about the learning needs of new pupils to be able to pitch teaching at the right level.
In Pembrokeshire, transition work and bridging units have been a feature of closer ties between primary and secondary schools for the past five years.
Graham Longster, Pembroke's head of schools improvement and inclusion, said Aiming for Excellence has "strengthened and supported" work already in place.
"But assessment is a thorny issue," he added. He would like to see more use of ICT to transfer pupils' work between primary and secondary schools.
Neath Port Talbot, which has well-connected clusters of schools, has also seen the benefits of bridging units, but admits that assessment is a major concern.
Aled Evans, primary development officer, said: "The message coming through from schools is that they don't feel confident about their assessment procedures. Sats may well have taken away some of the good practice that was previously in schools in terms of assessment."
Estyn's report urges the Welsh Assembly government to continue promoting Aiming for Excellence and to make funds available to prepare transition plans. Schools are required to have these from 2006-07, and pound;9.5million has been set aside to help fund the changes.
A government spokesperson said it would continue to make cash available to schools to support the key areas identified by Aiming for Excellence. She added: "Each LEA will be consulted on how the materials and guidance produced by this initiative can be disseminated to best effect in each local authority area."