Many secondary-age children with challenging behaviour, registered at the Ymlaen unit in Wrexham, are receiving less than half the teaching time they need to help them back into mainstream education, inspectors found.
In a report they said the progress of younger pupils was undermined because they did not attend morning and afternoon lessons. The body also hits out at the local authority's failure to address the problem, saying it was a major shortcoming.
By law, the PRU should be offering children 25 hours' teaching time per week. But, earlier this year, Estyn described the situation at the PRU as a "significant failure" after finding many pupils completed just 12 hours or fewer.
Inspectors said: "The achievement of all pupils, but especially those in Years 7, 8 and 9, is held back by the lack of taught-time offered."
But Bob MacLaren, chief safeguarding and support officer at Wrexham council, said: "Following the inspection, the authority has established an action plan that identifies a clear response to all of Estyn's recommendations.
"This includes the necessary action to deliver the 25 hours per week programme to each child registered with Ymlaen."
Inspectors praised the unit for its care of pupils. However, it found the effectiveness of strategic management and pupils' learning experiences had shortcomings.
Children at the unit make good progress in IT, they said, but less in maths because of poor behaviour. Achievement also needed to be raised in English, science, maths and humanities. But iteaching was effective in most instances.